Amarendra Nath Varma, J. - (1.) THESE two petitions raise the perennial question, viz., whether the Inspecting Assistant Commissioner of Income-tax had any reason to believe that the income of the petitioner in the years relevant for the assessment years 1981-82 and 1982-83 had escaped assessment.
(2.) THE impugned notices have been issued by the Inspecting Assistant Commissioner of Income-tax (Assessment), Range II, Kanpur, in the purported exercise of his powers under Section 148 of the Income-tax Act, respectively, on November 20, 1986 and September 15, 1986 for the two assessment years in question, namely, 1981-82 and 1982-83. THEy are assailed on the ground that there was no material which could legitimately form the basis for the belief that any income of the petitioner chargeable to tax had escaped assessment by reason of the petitioner's failure to disclose truly and fully all material facts necessary for assessment. In order to examine the correctness of this contention, this court directed learned standing counsel for the department to produce the relevant record containing the material forming the basis for such belief. In compliance, the relevant record was produced before us. THE reasons recorded by the Inspecting Assistant Commissioner (Assessment), based on which the impugned notices have been issued, find place in the record produced before us by the department. The main ground of attack urged by Sri Sudhir Chandra, learned counsel for the petitioner, against the impugned notices was that the material on the basis of which the Inspecting Assistant Commissioner has issued the notices bears no real and rational nexus to the belief that any income of the petitioner chargeable to tax had escaped assessment. In support, learned counsel placed reliance on Indian Oil Corporation v. ITO [1986] 159 ITR 956 (SC), Ganga Saran and Sons (P.) Ltd. v. ITO [1981] 130 ITR 1, 11 (SC) and Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC). These authorities lay down the parameters of the power of the assessing officer to reopen assessments under Section 147/148 of the Income-tax Act. The material facts necessary for appreciation of the submissions made at the Bar may be summarised thus. The petitioner, a public limited company, filed a return on October 1, 1981, for the assessment year 1981-82 showing a loss of Rs. 2,15,72,376. The Inspecting Assistant Commissioner completed the assessment, vide his order dated March 23, 1984, on a loss of Rs. 82,19,602. In the appeal filed by the assessee, the Commissioner of Income-tax gave relief of Rs. 64,255. In the meantime, the petitioner also filed the return of its income for the assessment year 1982-83 on September 15, 1982, showing a loss of Rs. 10,19,61,008. The Inspecting Assistant Commissioner completed the assessment for this year on October 29, 1984, on a net loss of Rs. 5,22,94,008. Again, the Commissioner of Income-tax (Appeals) partly allowed the petitioner's appeal by giving a relief of Rs. 98,985.
(3.) IT is noteworthy to mention at this point that in the profit and loss account submitted by the petitioner for the assessment year 1982-83, a note was appended stating that the system of purchases of cotton in the company underwent a change towards the close of 1980 as some of the directors had expressed from time to time that the purchases of cotton during the years 1980-81 and 1981-82 suffered from infirmities as a result of which the impugned transactions were got examined by two firms of chartered accountants in February/March, 1982. IT was further stated that the board of directors have appointed a committee for a further examination of the matter and the report of the committee was awaited. Meanwhile, it was decided that an outside agency be assigned the task of examination. After the close of the assessments for the two years, on the basis of certain information, the Inspecting Assistant Commissioner asked the petitioner to furnish certain information/documents through a letter "dated July 21, 1986. The petitioner furnished its reply on September 1, 1986. Soon thereafter, the petitioner received a notice dated September 15,1986, under Section 148 from the Inspecting Assistant Commissioner stating that the petitioner's income chargeable to tax for the assessment year 1981-82 has escaped assessment and, accordingly, it was proposed to reassess/recompute the income/loss/depreciation allowance for the said assessment year. In response to the said notice, the petitioner filed a return under protest and asked for a copy of the reasons based on which the impugned notice was issued. Some correspondence was exchanged thereafter which it is not necessary to elaborate here. Thereafter, the petitioner received a notice dated October 6, 1989, fixing the case for hearing for the assessment year 1981-82 on October 29, 1989. A similar notice dated November 20, 1986, under Section 148 was received by the petitioner also for the assessment year 1982-83 followed by the same pattern of events. The petitioner filed its return under protest and thereafter received a notice dated November 6, 1989, fixing November 29, 1989, for the hearing of the assessment proceedings for the assessment year 1982-83.;