M.C. Agarwal, J. - (1.) BY this petition under Article 226 of the Constitution of India, the petitioner challenges a notice dated March 26, 1998, issued under Section 148 of the Income-tax Act, 1961, for the assessment year 1987-88; a copy of which is annexure 5 to the writ petition.
(2.) WE have heard Sri V.B. Upadhya, senior advocate assisted by Sri A. Upadhya, advocate, learned counsel for the petitioner, and Sri Bharat Ji Agarwal, senior advocate, for the respondents. The proceedings relate to the assessment year 1987-88 for which a return of income was filed and an assessment was made under Section 143(1) of the Income-tax Act. Thereafter, on October 5, 1990, the Assessing Officer issued a notice under Section 148 which was received by the asses-see on October 10, 1990. In compliance with the said notice a return of income was filed on November 16, 1990. The petitioner claimed the status of a registered firm. On March 27, 1991, the assessment was completed in the status of an association of persons (AOP). On April 22, 1991, the Assessing Officer, i.e., respondent No. 1, passed an order under Section 154 of the Act stating that there had been a mistake in mentioning the status of the assessee in the assessment order and that in place of association of persons (AOP), URF (unregistered firm), be read throughout the assessment order. The assessee appealed and the Commissioner of Income-tax (Appeals) who allowed the appeal on the ground that an assessment on an association of persons could not be made without issuing a notice to the associations of persons. He, therefore, set aside the assessment directing that the assessment be made again, in accordance with law. Thereafter cross appeals were filed before the Tribunal by the Department as well as by the assessee, against the order passed by the Commissioner of Income-tax (Appeals). The Tribunal dismissed the Revenue's appeal and allowed the appeal by the assessee and quashed the assessment on the ground that in the circumstances of the case, no assessment could be made on the association of persons. During the time taken in the aforesaid proceedings, the assessment proceedings that had commenced on the basis of the notice dated October 5, 1990, under Section 148 of the Act became barred by time. Consequently, the Assessing Officer issued a fresh notice under Section 148 on March 26, 1998, and it is this notice which is under challenge in the present writ petition and the grounds of challenge have been mentioned in paragraph 26 of the writ petition which is as under : "(A) Because, the original notice under Section 148 having not been quashed and a return in pursuance of that notice having been filed, the Department has no jurisdiction to issue subsequent notice dated March 26, 1998, on the same facts for the same assessment year, i.e., 1987-88, during the pendency of the earlier proceedings. (B) Because, the notice having been issued with a view to circumvent the period of limitation, is, therefore, illegal, arbitrary and without jurisdiction. (C) Because, no subsequent notice can be issued on the same facts and on the same ground for the same assessment year, i.e. 1987-88."
(3.) THE respondents have filed a counter affidavit which is sworn by one Shiv Ram Singh Chahal in which it is stated that a search was conducted at the business premises of the assessee as well as the residential premises of the partners and some incriminating material was found and seized. THE history of the case, as stated above, is admitted and it is stated that an application under Section 256(1) has been filed against the aforesaid order of the Tribunal. It is stated that the Commissioner of Income-tax directed that the assessment for the year under consideration may be reopened under Section 147 and in compliance of the directions of the Commissioner, the case was reopened with the approval of the Commissioner of Income-tax and the impugned notice under Section 148 was issued and was duly served. It is stated that the impugned notice was served on the partnership firm. It is also stated that the notice under Section 148 was issued to assess the income which was surrendered by the assessee itself during the course of search and seizure operation. In the rejoinder affidavit it is stated that from the counter affidavit itself it is apparent that the assessment was reopened under the dictates of the Commissioner of Income-tax while Section 147 of the Act provides that an assessment can be reopened only if the Assessing Officer has reason to believe that the income has escaped assessment. Under Section 147 of the Income-tax Act if the Assessing Officer "has reason to believe" that any income chargeable to tax has escaped assessment for any assessment year, he may.... assess or reassess such income . . . Thus, the law requires that the Assessing Officer should have the reason/reasons to believe and Sub-section (2) of Section 148 provides that before issuing a notice for an intended assessment/reassessment under Section 147, the Assessing Officer shall record his reasons for doing so. Thus, the Assessing Officer has to record the reasons for issuing a notice under Section 147 and he has to have his own reasons to believe that any income chargeable to tax has escaped assessment. There is no dispute on this proposition of law and it was so held by the Supreme Court in Indian and Eastern Newspaper Society v. CIT 1979] 119 ITR 996, in which a question had arisen whether proceedings under Section 147 could be initiated on the basis of a report by an internal audit party. At page 1004 of the judgment, the Supreme Court observed that in every case, the Income-tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment and that the opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income-tax Officer. Some other authorities were also cited on this point but since the legal position is settled and is not disputed, it is not necessary to refer to them here.;