JOINT COMMISSIONER OF INCOME TAX ASSESSMENT Vs. GEORGE WILLIAMSON ASSAM LIMITED

JUDGEMENT

(1.) THE basic fundamental facts, relevant for the purposes of adjudication of the questions involved in all these twelve appeals are similar and, therefore, all the matters are decided by a common order.

(2.) TO better understand the questions involved and for convenience, we shall refer to the facts in Civil Rule No. 6491 of 1998 which are, as stated by the petitioner, that Namdang Tea Company (India) Ltd. was incorporated under the Companies Act, 1956, having its registered office at Guwahati. The said company owned two tea estates, namely, Namdang Tea Estate and Bogapani Tea Estate, both situated in the State of Assam. The said company was carrying on the business of growing green tea leaves in its own tea gardens and manufacturing black tea out of the said green tea leaves grown by it as well as others and further selling it in India and abroad. Under the scheme of arrangement, the tea business of the said company was transferred to Mcleod Russel (India) Ltd. Subsequently, under a scheme of arrangement, the said Mcleod Russel (India) Ltd. merged with Eveready Industries India Ltd. w.e.f. 1st April, 1996, and that is how the writ petition is filed by the petitioner company.

(3.) THE company received a notice dt. 30th Oct.,/2nd Nov., 1998, from the AO under S. 148 of the IT Act, 1961, alleging that the income of the company for the asst. year 1991 92 had escaped assessment within the meaning of S. 147 of the Act and that he proposes to assess/reassess the income of the said company. The company addressed a letter to the assessing authority contending, inter alia, that no income of the company for the assessment year in question had escaped assessment and such escapement of assessment, if any, was not by reason of any omission and/or failure on the part of the company either to file any return or to disclose fully and/or truly all primary and/or material facts necessary for the assessment of the said company and, therefore, the condition precedent for invoking the power under S. 147 r/w S. 148 of the Act of 1961 was not fulfilled. The sine qua non for exercising the power under S. 147/148 of the Act having not been present, the AO had no jurisdiction to issue the notices. The company had also filed the return under protest. Thereafter, the petitioner received a notice dt. 3rd/4th Dec., 1998, from the AO under S. 142 of the Act requiring the petitioner to furnish a return under S. 142(1) of the Act of 1961 and also to produce or cause to be produced before him the books of account, etc., relevant to the assessment year. The petitioner at this stage has moved a petition before the High Court under Art. 226 of the Constitution of India challenging the notices issued by the AO under S. 147 r/w S. 148 of the Act of 1961. The High Court admitted the petition and issued notices to the respondent Department. The respondents to the petition, namely, (1) Jt. CIT (Asstt.), Special Range II, Guwahati, (2) CIT, Guwahati, and (3) Union of India, through the Secretary, Government of India, Finance Department, Ministry of Finance, New Delhi, filed counter by way of an affidavit, dt. 8th Oct., 1999. The affidavit has been sworn by Shri J. C. Pegu, Jt. CIT, Special Range II, Guwahati, who was the AO. The details of the affidavit filed shall be referred to subsequently. In a nutshell, the contention of the Department was that the proceedings have been initiated on the basis of an enquiry conducted by an outside authority and relying on that enquiry, the present notices have been issued. The AO has reason to believe that income has escaped assessment due to failure and/or omission on the part of the assessee to disclose the materials necessary for the purpose of assessment. In the order sheets, the AO has recorded the reasons which led to his belief that income chargeable to tax to the tune of Rs. 27,25,600 had escaped assessment within the meaning of S. 147 of the Act during the assessment year on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of his income in the assessment proceedings under S. 143(3) of the Act. An additional affidavit has been filed by Shri J. C. Pegu, the AO, on 29th Nov., 1999, disclosing the reasons for initiating action under S. 147 r/w S. 148 of the Act and for the impugned notices. The details of the reasons shall be referred to subsequently. Thus, it is the stand of the Department that there was reason to believe by the AO that income chargeable to tax has escaped assessment for the assessment year and further, that income chargeable to tax has escaped assessment for the assessment year in question by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the assessment year, and, therefore, the exercise of the powers under S. 147, and consequent issuance of notice under S. 148 of the IT Act, 1961, is in accordance with law.