OM TRADING CO Vs. SECOND INCOME TAX OFFICER

JUDGEMENT

(1.) ALL the petitions involve an identical question. Facts in W. Ps. Nos. 462 to 464 of 1988 are referred to hereinafter.

(2.) THE petitioners are registered firms; they challenge the notices dated December 21, 1987, issued under sections 142(1) and 143(2) of the Income-tax Act ("the Act), in respect of the assessment year 1986-87, issued by the respondent. THE three petitioners had declared incomes of Rs. 41,030, Rs. 34,140 and Rs. 24,650, respectively, for the year in question; the returns were accompanied and profit and loss account as well as the balance-sheet; other details were also furnished. THE assessing authority (the respondent) had accepted the returns and made orders of assessment accordingly. Subsequently, the impugned notices were issued. Since assessment orders had already been made, the petitioners sought the relation behind the issuance of the notices. THE petitioners were informed that their case were selected under the scheme of "selective scrutiny case" and, therefore, notices were issued. Accordingly to the petitioners, without a proper and valid reopening of the assessment, no fresh proceedings could be commenced with reference to the completed assessments; the notice under section 143(2)(b) should be preceded by the opinion formed by the Income-tax Officer that the return filed by the assessee was incorrect and incomplete; since no such option is formed and there is no material to from such an opinion, the notices issued were without jurisdiction; the petitioners further contend that, in the notices, the respondent has not specified the point upon which the petitioners had to produce the evidence.

(3.) THE new scheme adopted by the Revenue basically reposes faith in assessees and expects them to disclose full particulars of their income and claim only proper deductions; this procedure referred as "summary assessment procedure" reduces the volume of the department's work as otherwise the time of the authorities would be spent in scrutinising each and every "return of income" irrespective of the income; similarly, a large number of assesses are saved the trouble of attending to their cases at the time of scrutiny. However, a likelihood of a scrutiny under section 143(2) would always act as a deterrent against an assessee taking undue advantage of the scheme by filing incorrect returns. THE scheme is beneficial and is a liberal scheme from the point of view of the assessees. Its success depends on the honesty of the assessees; the faith reposed in the assessees has to be properly reciprocated by them. THE power vested in the authorities to verify the correctness and completeness of the return requiring the presence of the assessee or the production of the evidence, if the Income-tax Officer considers it necessary or expedient, is a salient provision to effectuate the purposes of the summary assessment scheme this is one of the provisions by which the assessees are warned to be truthful while filing their returns. Though the condition for invoking the power under section 143(2)(b) is the opinion of the Income-tax Officer that it is "necessary" or "expedient" to do so, and these words are wide in their scope, the Board has taken sufficient care against indiscriminate resort to this power by the assessing authorities. When already an order of assessment is made, this power cannot be invoked without the prior approval of the Inspecting Assistant Commissioner as per the proviso to section 143(2)(b). THE Circulars issued by the Board disclose the cases that will be normally covered by this provision for the scrutiny of the returns.