ANJANEYULU Y V Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner who was a legal practitioner and was later elevated as a judge of this Court in November, 1983 (since recently retired), impugns the validity of the notice dated March 10, 1988, issued by the ITO concerned under section 148 of the IT Act proposing to reassess certain income on the ground that it has escaped assessment for the asst. year 1983 84. Format : The assessee petitioner returned a gross income of Rs. 2,57,571 for the asst. year 1983 84 and after claiming statutory deductions, the net income returned was Rs. 2,40,245 and on due assessment, requisite tax was paid. A notice dated March 10, 1988 was, however, issued by the ITO, Salary Circle, under S. 148 of the IT Act (for short "the Act") proposing to reassess the income for the said assessment year, requiring him to file a return as he had reason to believe that certain income chargeable to tax for the said year has escaped assessment within the meaning of S. 147 (b) of the Act. The reasons for the reopening of the said assessment were sought for, but before the same were communicated, this writ petition was filed challenging the validity of the said notice on the grounds, inter alia, that there was no information which could have induced a reasonable belief in the Income tax Officer that income had escaped assessment in the hands of the petitioner for the asst. year 1983 84.

(2.) THE assessment for the year 1983 84 was completed on November 5, 1983. Thereafter, it has come to the knowledge of the Department that an advocate client relationship existed between the settlor of the trust and the petitioner. It was further learnt that the assessee petitioner was representing the late R. S. Chenai and his family members since a long time, in the income tax, wealth tax and estate duty assessments. He was solely responsible for reduction of huge estate duty liability of both the late R. S. Chenai and his son's estate. Similarly, he has been representing the legal heirs of both the father and son. The assessee's son purchased a site from Mrs. Shapoor Chenai and constructed a building when he was representing the estate duty cases before the authorities. In view of the substantial reduction gained by the effective representation of the assessee petitioner, the wife of the late R. S. Chenai, instead of paying professional fees, preferred to create the said trust which is a device adopted by the assessee to escape proper taxation in his hands. The receipt of Rs. 5 lakhs can be held as a professional receipt for the meritorious services rendered by the assessee, camouflaged in the formation of a family trust created. The ITO who made the assessment on November 5, 1983, lost sight of the fact that the factum of receipt of Rs. 5 lakhs for the services rendered is assessable as a professional receipt. Accordingly, a notice was issued calling upon him to file a return, which he did on April 4, 1988, which is the same as the original return.

(3.) IT is further averred that the letter of confirmation addressed to the ITO by Mrs. F. R. Chenai was obtained by the petitioner himself and forwarded to the ITO with his covering letter. The then ITO did not in fact consider whether the amount of Rs. 5 lakhs being the face value of the 7per cent capital investment bonds, should be treated as professional receipts and taxed as such. He accepted the income returned as such by the petitioner. It has subsequently come to the knowledge of the Department that Mrs. F. R. Chenai has been a client of the petitioner and that he had appeared on her behalf in many important cases, notably estate duty cases of the late R. S. Chenai and Shapoor Chenai. The petitioner's action in rushing to this Court even before the communication of reasons by the respondent is premature.