RAKESH AGGARWAL Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) TWO of the writ petitions, taken up herein, involve the provisions of the INCOME TAX ACT, 1961, and the other two involve the provisions of the Wealth -tax Act, 1957 (for short, "the WT Act"). All the four writ petitions raise common questions of law and even the relief sought in all, in substance being the same, these are dealt with under a common judgment. To appreciate the controversy, we shall treat the facts in CWP No. 3796 of 1992 as illustrative. The petitions pertain to the asst. yrs. 1989 - 90 and 1990 -91.

(2.) THE petitioner, who was assessed to income -tax and wealth -tax in his capacity as the legal heir of the late Shri R.S. Agarwal, submitted the return of income for the asst. year 1989 -90 on 30th Oct., 1989, which was accompanied by a statement of taxable income, showing income from various sources including income from house property. The return was accepted and an intimation under S. 143(1)(a) of the IT Act was sent. Subsequently, on 2nd Aug., 1991, the AO issued a notice under S. 148 of the IT Act, requiring the petitioner to file the return as he had reason to believe that certain income chargeable to tax had escaped assessment within the meaning of s. 147 of the IT Act, inasmuch as: (a) the rent from the property owned by the assessee, R.S. Aggarwal, was kept low and for the difference in rent he was compensated by giving interest -free securities of Rs. 8 lakhs and Rs. 5,50,500 by the two companies, which fact came to light during the course of the assessment proceedings for the asst. year 1988 -89, wherein the assessee had himself admitted that the correct rental income could be determined by adding 15 per cent. interest on the interest -free securities received by him, and (b) the value of the perquisites provided by Hotel Banjara Ltd., one of the tenants, in the form of residential accommodation had not been correctly shown in the return of income. In response to the notice issued, the assessee filed the return of income on 21st Oct., 1991. In order to get information on certain points, the AO issued a letter to the petitioner on 25th Oct., 1991, calling upon him to appear before him and produce any document, accounts or any other evidence which the petitioner may like to, in support of the return filed on 21st Oct., 1991. It appears that no proceedings took place before the AO on the appointed date or thereafter. Again on 30th Oct., 1991, an intimation under S. 143(1)(a) of the IT Act was sent to the petitioner, accepting the return filed on 21st Oct., 1991. Thereafter, on 1st May, 1992, the AO issued a fresh notice under S. 143(2) calling upon the petitioner to appear before him and furnish documents/clarifications on certain points. The petitioner furnished information in respect of certain points but thereafter objected to the continuation of the proceedings on the plea that the AO having made the assessment on 30th Oct., 1991, when an intimation under S. 143(1)(a) of the IT Act was sent after issuing a notice under S. 143(2) of the IT Act, he could not make another assessment under S. 143(3) of the IT Act. The officer was told that the proceedings initiated on 1st May, 1992, by issuing notice under S. 143(2) of the IT Act were without jurisdiction and was requested to drop the same. The officer declined to accede to the petitioner's request. Hence, the present writ petition in which the petitioner now seeks to challenge even the validity of notice under S. 148 of the IT Act issued on 2nd Aug., 1991, and further proceedings taken thereafter on the basis of the return filed pursuant to the said notice. The action of the AO in issuing notice under S. 148 is challenged on the ground that the petitioner having furnished to the AO all the details regarding the tenanted premises, including the amount of deposits received from the tenants, the AO could possibly have no "reason to believe" that any income chargeable to tax for the relevant assessment year had escaped assessment due to failure of the petitioner to disclose fully and truly all material facts necessary for his assessment and, therefore, in the absence of this vital ingredient, a condition precedent for exercising jurisdiction under S. 147(a) of the IT Act, the notice under S. 148 was illegal and without jurisdiction. The re - initiation of assessment proceedings by issuing notice under S. 143(2) on 1st May, 1992, after issue of an intimation under S. 143(1)(a) of the IT Act, is assailed on the ground that on submission of the return under S. 148, a notice under S. 143(2) was issued on 25th Oct., 1991, before the intimation under S. 143(1)(a) was sent on 30th Oct., 1991, and, therefore, the said order, though termed as intimation, in fact was tantamount to a regular assessment under S. 143 (3) of the IT Act. That being so, it is pleaded that the power of the AO to issue a notice under s. 143(2), with reference to the return filed on 21st Oct., 1991, stood exhausted and, therefore, there was no question of fresh assessment proceedings being commenced by issuing a notice under s. 143(2) of the IT Act. On the merits, it is claimed that the information furnished during the course of assessment proceedings for the asst. year 1988 -89 has been misconstrued by the AO inasmuch as no interest income was in fact earned by the petitioner on the said security deposits and the interest which the petitioner could possibly earn on the said deposits was mentioned as an opportunity cost to justify the rateable value of the property in question.

(3.) INDISPUTABLY , S. 147 as it existed after its amendment by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1st April, 1989, would apply to the facts in hand. Sec. 147, material for our purpose, reads as follows: