Sapan Usre the, Adv. for the Petitioner. Sanjay Lal, Adv. for the Respondent.

This petition under Article 226/227 of the Constitution of India assails the notice dated 27.03.2021 (Annexure P/3) issued u/S 148 (of Income Tax Act, 1961) (for brevity “the IT Act”) asking the petitioner to explain as to why the assessment proceedings be not re-opened to assess escaped income for assessment year 2013-14. Further challenge is made to the rejection vide Annexure P/7 of the reply objecting to the re-opening of assessment.

2. Learned counsel for petitioner and that of the Revenue are heard on the question of admission so also on final disposal.

3. The principal contention of learned counsel for petitioner is that in the light of proviso to Section 147 (of Income Tax Act, 1961), assessment proceedings cannot be re-opened after expiry of four years from the end of the relevant assessment year and since the relevant assessment year in the instant case was 2013-14, the notice vide Annexure P/3 issued on 27.03.2021 is non est in the eyes of law.

4. Learned counsel for the Revenue on the other hand has read over the rejection of objection filed by petitioner vide Income Tax Officer (ITO). It is submitted by the Revenue that to understand the controversy, it is essential not only to read proviso to Section 147 (of Income Tax Act, 1961) but also Explanation- 1 to the said proviso. By referring to the said Explanation, it is submitted that an exception has been carved out in Explanation-1, which circumscribes the jurisdiction available to the Assessing Officer while re-opening cases relating to income which has escaped assessment. It is submitted that Explanation-1 vests Assessing Officer with the authority to invoke Section 147 (of Income Tax Act, 1961) in respect of cases pertaining to assessment year more than four years old when it is found that their account books or other material furnished by the assessee were insufficient for the Assessing Officer to discover escaped income despite exercise of due diligence.

5. For the purpose of proper adjudication of the issue involved, it would be apt to reproduce Section 147 (of Income Tax Act, 1961) as it stood prior to 01.04.2021 in to as follows :-

“[Income escaping assessment- If the [Assessing Officer], [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):

Provided that where an assessment under sub-section (3) of section 143 (of Income Tax Act, 1961) or this section has been made for the relevant assessment, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 (of Income Tax Act, 1961) or in response to a notice issued under sub- section (1) of section 142 (of Income Tax Act, 1961) or section 148 (of Income Tax Act, 1961) or to disclose fully and truly all material facts necessary for his assessment for that assessment year :

[Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:]

[Provided also] that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject-matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.]

Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the [Assessing Officer] will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment namely :-

(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;

[(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E (of Income Tax Act, 1961);].

(c) where an assessment has been made, but-

(i) income chargeable to tax has been underassessed; or

(ii) such income has been assessed at loo low a rate; or

(iii) such income has been made the subject of excessive relief under this Act; or

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.]

[(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C (of Income Tax Act, 1961), it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;]

[(d) where a person is found to have any asset (including financial interest in any entity) located outside India.]

Explanation 3.- For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148 (of Income Tax Act, 1961).]

Explanation 4.- For the removal of doubts, it is hereby clarified that the provisions of this section, as amended, by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.]”

6. A bare perusal of the aforesaid provision contained in Section 147 (of Income Tax Act, 1961) including the proviso and Explanation-1, reveals that the bar excluding jurisdiction of Assessing Authority to re-open cases relating to assessment year more than four years old, is subject to exceptions, which are as follows :-

i) The first being that if any income chargeable to tax had escaped assessment for any assessment year by reason of failure of the assessee to make a return u/S 139 (of Income Tax Act, 1961), or

ii) Failure of the assessee to disclose fully and truly all material facts necessary for assessment for the particular assessment year.

6.1 The Explanation-1 circumscribes the aforesaid exception (ii) that if the material and account books produced by the assessee for the relevant assessment year are such where despite exercise of due diligence, the Assessing Officer could not discover escaped income then such disclosure would not provide immunity to assessee from the clutches of Section 147 (of Income Tax Act, 1961).

7. The reasons assigned by the Assessing Officer in Annexure P/7 dated 04.02.2022 is that the material and accounts books furnished qua the relevant assessment year were insufficient despite exercise of due diligence to discover escaped income. The contents of Explanation-1 to proviso of Section 147 (of Income Tax Act, 1961) vests the Assessing Authority with ample power to invoke Section 147 (of Income Tax Act, 1961) qua assessment year more than four years old.

8. This Court cannot go into the sufficiency of reasons assigned specially when the case is pending before the Assessing Authority to adjudicate upon in regard to alleged escaped income of year 2013-14.

9. Writ jurisdiction of this Court under Article 226 of the Constitution of India or supervisory jurisdiction of this Court under Article 227 of the Constitution of India cannot be invoked to attack the sufficiency of the reasons assigned for re-opening of a case of escaped income so long as the power exercised and the reasons assigned therefore are traceable to any statutory provision. Thus, it cannot be said that the impugned notice of the assessment and re-opening of the case u/S 147 (of Income Tax Act, 1961) is bereft of jurisdiction.

10. In view of the above, this Court declines interference and relegates the petitioner to avail the remedy of participating in the assessment proceedings pending before Assessing Officer or any other remedy available to him in law.

11. With the aforesaid liberty, the petition stands dismissed.

(SHEEL NAGU) (MANINDER S BHATTI)

JUDGE JUDGE