V. Ramkumar, J.@mdashIn this appeal filed u/s 260A of the Income Tax Act, 1961, (hereinafter referred to as ""the Act""), the Revenue assails the
order dated July 27, 2005, of the Income Tax Appellate Tribunal, Cochin Bench, in I. T. A. No. 117/Coch of 2005.
2. As per the impugned order the Income Tax Appellate Tribunal partly allowed the respondent assessee''s appeal holding that the notice issued by
the Assessing Officer to the assessee u/s 148 of the Act is void ab initio and consequently set aside the reassessment proceedings initiated against
the assessee u/s 147 of the Act.
3. The substantial questions of law formulated in the memorandum of appeal are the following :
(i) Whether, on the facts and in the circumstances of the case and the satisfaction contemplated under the statute being prior to and for the issue of
notice u/s 148 of the Income Tax Act and the same (satisfaction having been found by the Commissioner of Income Tax (Appeals)) on the perusal
of the reasons recorded in the miscellaneous records (vide paragraph 4 of the order of the Commissioner of Income Tax (Appeals)) the Tribunal is
right in law and fact in holding that there is nothing on record to show that the Assessing Officer had applied his mind and is not the finding perverse
and without application of mind to materials on record ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact :
(i) in interfering with the reassessment;
(ii) in holding that the proceedings initiated against the assessee u/s 147 are bad in law ?
(iii) Whether, on the facts and in the circumstances of the case should not the Tribunal have considered the issue of satisfaction and the validity of
initiation of reassessment in the light of the reasons recorded prior to initiation of reassessment and is not the approach to the issue of satisfaction
based on remarks in the assessment order against law, logic, perverse and vitiated ?
4. We heard senior advocate Sri P. K. Raveendranatha Menon, learned counsel appearing for the Revenue, and advocate Sri Dale P. Kurian,
learned counsel appearing for the assessee.
The stand of the assessee
5. With a view to persuade us to confirm the order of the Income Tax Appellate Tribunal, advocate Sri Dale P. Kurian made the following
submissions before us :
6. The assessment in respect of the assessee u/s 143(3) of the Act had initially been completed on the basis of a return filed by him showing his
income pursuant to a notice issued u/s 142 of the Act by the Deputy Commissioner of Income Tax, Investigation Circle-I, Calicut. Reassessment
proceedings against the assessee u/s 147 of the Act were initiated by the Joint Commissioner of Income Tax, R2, Kozhikode, acting under the
directions and instructions of the Commissioner of Income Tax, Circle-2(1), Calicut, as per annexure F letter dated May 30, 2003. As per the
provisions of Section 147 of the Act it is the Assessing Officer who is invested with the power to invoke the said provision for reassessment and
that too after complying with the mandatory requirements which include a notice u/s 148 of the Act. Before issuing such notice, the Assessing
Officer himself has to apply his mind and form an opinion recording his reasons for initiating proceedings u/s 147. When it is for the Assessing
Officer to form the requisite opinion on being satisfied about the existence of reasons for his belief that income has escaped assessment, his
independent judgment cannot be allowed to be influenced at the instance of his official superior. In other words, in a case, as the present, where
the original authority does something acting under the dictation of his superior, his action will be tainted with illegality thereby rendering the
proceedings null and void. But for the direction of the Commissioner of Income Tax in annexure F letter dated May 30, 2003, the Deputy
Commissioner would not have issued the notice u/s 148 of the Act. Hence, the consequential action for reassessment of income initiated by the
Deputy Commissioner of Income Tax is vitiated. Reassessment proceedings initiated by the assessing authority without himself forming the requisite
belief u/s 147 of the Act, but instead, reopening the assessment on the directions of his superior, are liable to be quashed, (vide Chunnilal
Onkarmal (Pvt.) Ltd. Vs. Income Tax Officer, ""A"" Ward and Others, ; Sheo Narain Jaiswal and Others Vs. Income Tax Officer and Others, . The
Assessing Officer had initially completed the assessment on the premise that the assessee was a carrier of 48 gold biscuits in question the value of
which was not treated as the income of the assessee. Going by his statement, the gold biscuits really belonged to one V. Ahammed. When there
was no failure on the part of the assessee to disclose any material fact original, the assessment cannot be corrected in reassessment proceedings
(vide Income Tax Officer, Income Tax-cum-Wealth Tax Circle II, Hyderabad Vs. Nawab Mir Barkat Ali Khan Bahadur, Hyderabad, and
Lokendra Singh Vs. Income Tax Officer and Another, . It was on the direction of the Commissioner of Income Tax that the Deputy Commissioner
changed his opinion to hold the view that the sum of Rs. 26,46,000 invested for purchasing the gold biscuits had escaped assessment for the
assessment year 1998-99. There cannot be any reopening of assessment for the mere reason that the Assessing Officer had subsequently changed
his opinion (vide Sita World Travels (India) Ltd. Vs. Commissioner of Income Tax and Another, . The order of the Tribunal does not call for any
interference and may be confirmed. However, the dismissal by the Tribunal of grounds Nos. 2, 4 and 5 as not pressed, is not correct since those
grounds were also pressed by the assessee.
Judicial evaluation
7. We are afraid that we find ourselves unable to agree with the above submissions.
The factual matrix
8. On April 26,1997, the Airport Security at the Trivandrum Airport seized 48 gold biscuits weighing 5595 gms. from the assessee. They handed
over the assessee along with the seized gold to the Valiyathura Police who registered a case as Crime No. 104/97. The assessee was arrested and
produced before the J. F. C. M.�I, Thiruvananthapuram, who remanded him to judicial custody. Invoking the provisions of Section 132A of the
Act, the Income Tax authorities requisitioned the seized gold from the police authorities. The assessee moved this court challenging the request
made by the Income Tax authorities. This court set aside the action taken by the Income Tax authorities and ordered return of the gold to the
magistrate''s court. Thereafter a notice was issued to the assessee on December 13,1999, u/s 142 of the Act calling upon him to file a return of his
income for the assessment year 1998-99. In response to the said notice, the assessee filed his return showing ""nil"" income. The return filed by the
assessee was processed and no further action was taken. In the meanwhile, the Income Tax authorities returned the gold to the magistrate''s court
in obedience to the direction of his court. Even though the Income Tax Department moved the magistrate for the custody of the gold biscuits
alleging that the same were acquired by the assessee out of undisclosed income, their request was disallowed by the magistrate. Thereupon the
Department moved the Sessions Court, Thiruvananthapuram. The sessions court ordered to hand over the gold to the Income Tax Department. In
the meantime, noticing that the Sessions Court, Thiruvananthapuram, had ordered return of the gold biscuits seized from the assessee to the
Income Tax Department and that, thereafter the Department had taken possession of the same on May 7, 2003, and had deposited the gold
biscuits with the Reserve Bank of India, Thiruvananthapuram, for safe custody, the Commissioner of Income Tax, Kozhikode, as per annexure F
letter dated May 30, 2003, directed the Deputy Commissioner of Income Tax, Circle-2(1), Kozhikode, to initiate Income Tax proceedings by
issuing notice u/s 148 of the Act after recording his reasons for the same. The text of the letter reads as follows :
Copies of the judgment of the Additional Sessions Judge, Thiruvananthapuram, and other relevant documents are enclosed herewith.
As per the judgment referred to above, gold biscuits weighing 5.597 kg were ordered to be handed over to the Income Tax Department and the
same were taken possession of by the Income Tax Officer (CIB) on 7-5-2003, and deposited with the Reserve Bank of India,
Thiruvananthapuram, for safe custody. The Assessing Officer is hereby directed to initiated Income Tax proceedings by issue of notice u/s 148
after recording his reasons for the same. The gold biscuits were seized by police on 26-4-1997, from Abdul Khader. So, Section 148 proceedings
are to be initiated with respect to that date. The Assessing Officer is to comply with all the requirements of law while initiating action. The
assessment may be completed as early as possible.
(emphasis supplied)
9. On receipt of annexure F letter the Deputy Commissioner after verifying the records recorded the following reasons (annexure E) in support of
his belief that the income had escaped assessment.
Reasons for the belief that income has escaped assessment :
On April 26, 1997, the Thiruvananthapuram Airport Security seized 48 gold biscuits weighing 5.595 gms from one Abdul Khadar and the seized
articles were handed over to the Valiathura Police. The gold biscuits were handed over to the Income Tax Department as per the provisions of
Section 132A of the Income Tax Act. Later on, these articles were returned to the court. As per the order in Crl. A. No. 25 of 2000 and Crl. A.
No. 358 of 2000 of the Addl. Sessions Judge, Thiruvananthapuram,. These gold biscuits were again handed over to the Income Tax Department.
The assessee did not disclose the source of income for purchase of gold weighing 5595 gms value of which works out to Rs. 26,46,000 in the
original return filed on January 31, 2000. Therefore I have reason to believe that income invested in purchase of gold biscuits has escaped
assessment for the assessment year 1998-99. The tax effect including interest under Sections 234A and 234B comes to Rs. 20,87,292. The action
u/s 148 is therefore, necessary.
10. As per annexure A order dated October 23, 2003, the Deputy Commissioner completed the assessment treating the sum of Rs. 26,46,000 as
the escaped income which constituted the source for acquiring 48 gold biscuits weighing 5596 gms. An appeal preferred by the assessee before
the Commissioner of Income Tax (Appeals)-I, Calicut, was unsuccessful as evidenced by annexure B order dated August 23, 2004. Thereupon
the assessee filed an appeal as I. T. A. No. 117/Coch/05 before the Income Tax Appellate Tribunal, Cochin Bench, which as per annexure C
order dated July 27, 2005, allowed the appeal in part and set aside the reassessment proceedings initiated u/s 147 of the Act, for the reasons that
the notice u/s 148 of the Act issued by the Assessing Officer acting under the dictation of his superior and without applying his mind was void ab
initio.
The legal issues
11. We will first dispose of a contention urged on behalf of the assessee that grounds Nos. 2, 4 and 5 raised before the Tribunal were also pressed
by the assessee and the statement to the contrary contained in annexure C order of the Tribunal is wrong. The Tribunal has unequivocally observed
in paragraph 1 of its order that out of the five grounds raised by the assessee, counsel appearing for the assessee submitted that he was pressing
only grounds Nos. 1 and 3. The Tribunal accordingly dismissed as not pressed grounds Nos. 2, 4 and 5. It is pertinent to note that it is not counsel
who appeared for the assessee before the Tribunal below who has chosen to dispute the statement in the order. It is a different counsel who has
now come out with a denial and that too by means of a verified petition. That is clearly not permissible. Even if a wrong record has been made in
the order as to what transpired before the court or Tribunal the remedy of the aggrieved party is not to dispute the record before a higher forum
but to seek a review before the lower forum itself. The judge''s record is conclusive and neither the lawyer nor the litigant is entitled to contradict it
except before the judge himself and nowhere else. It is not open to the assessee to dispute before us the correctness of the above observation in
the order of the Tribunal. The question as to what transpired before a court or Tribunal, it can be gathered from the proceedings or order of the
Tribunal, then no party will ordinarily be permitted to take exception to or contradict the statement to that effect in the order. What has been stated
in the order should be taken as the last word on that question. If the parties or their counsel are permitted to indulge in a controverting exercise
then there will be no end to it. (See State of Maharashtra Vs. Ramdas Shrinivas Nayak and Another, , Sankara Pillai Kujukrishna Pillai Vs.
Ananda Pillai Bharathi Amma, , Sumangali v. Kochumatha [1959] KLR 1043, The Works Manager, Bihar State Superphosphate Factory, Sindri
Vs. Sri C.P. Singh and Others, etc., , Bank of Bihar Ltd. Vs. Mahabir Lal and Others, , Gauri Shanker Vs. Hindustan Trust (Pvt.) Ltd. and
Others, , Daman Singh and Others Vs. State of Punjab and Others, , Mohamamed Shafi v. Mohamamed Haji [1986] KLT 55, Ramanujamma
Vs. Nagamma and Another, , Vela-yudhan v. Joseph [1955] KLT 276 and Madhavan Pillai v. Bhaskaran Pillai [1985] KLT 47).
12. What now survives for consideration is the question as to whether the 12 order of the assessing authority is vitiated for the reason that he was
acting under the dictation of his superior. On the merits of the case we are of the view that there is nothing in annexure F letter of the Commissioner
of Income Tax extracted herein above so as to conclude that the assessing authority was acting under the dictation of his superior. No doubt the
Commissioner has directed the assessing authority to initiate Income Tax proceedings. But the further direction was to issue notice u/s 148 after
recording his reasons for the same. There is still another direction that the Assessing Officer should comply with all the requirements of law while
initiating action. The reassessment proceedings initiated by the Deputy Commissioner was after applying his mind to all the relevant materials and
also after recording the grounds of his belief as already extracted herein -above. It is not even remotely discernible from annexure E that the
Deputy Commissioner was mechanically obeying the directions of his official superior. There is not even a reference to annexure F letter. Even if
there is advertence in the reassessment proceedings to the direction of the superior officer, that by itself will not vitiate the resultant proceedings as
long as the Assessing Officer has independently applied his mind to all the relevant aspects and has arrived at the reasons for his belief. On the
facts and circumstances of the case, we have no hesitation to conclude that annexure F letter has only alerted the Assessing Officer of his statutory
obligation in the light of the subsequent turn of events culminating in the gold biscuits seized from the assessee having been entrusted with the
Income Tax Department. The pendency of the criminal proceedings and the ultimate order passed by the sessions court, etc., were not within the
knowledge of the Assessing Officer. Those supervening events were conveyed to the Assessing Officer by the Commissioner at whose level the
litigations were conducted. Reminding an officer of his statutory duty and directing him to proceed in accordance to law after arriving at the
requisite satisfaction under the statute cannot amount to a dictation to act in a particular way. The officer to whom such a reminder is given also
cannot be said to abdicate his function if he proceeds according to law uninfluenced by any direction from his superior. If the direction by the
Commissioner was to reopen the assessment u/s 147 of the Act by bypassing the statutory formalities, that would have probably amounted to
dictating his subordinate to act in a particular way thereby taking away the discretion vested in the subordinate. On the contrary, annexure F letter
only asks the Deputy Commissioner to issue a notice of reassessment u/s 148 of the Act and that too after recording the requisite grounds of belief.
The Deputy Commissioner also proceeded only after satisfying himself that there existed adequate grounds of belief to initiate reassessment
proceed-ings. As rightly observed by the appellate authority in annexure B order, the assessee has been assessed on the basis of the presumption
u/s 132(4A) of the Act to the effect that any valuables, books of account, cash, etc., found on a person during a search shall be deemed to be his
own unless proved otherwise with sufficient evidence. The presumption u/s 132(4A) applies equally to action u/s 132A and the appellant who was
given sufficient opportunities to rebut the presumption, failed to do so. It is clear from the reasons recorded by the Assessing Officer that he had
prima facie reason to believe that the assessee had omitted to disclose fully and truly all material facts and that as a consequence of such non-
disclosure income had escaped assessment within the meaning of Section 147 of the Act. The facts of Sheo Narain Jaiswal and Others Vs. Income
Tax Officer and Others, cited by counsel for the assessee are unique. When under the law the requisite belief u/s 147 of the Act must be that of the
Assessing Officer, the Income Tax Officer in that case, instead of forming his own belief, was merely acting at the behest of his superior authority.
In fact, the Income Tax Officer was holding the view against the taxability of the assessee in that case. Likewise, in Chunnilal Onkarmal (Pvt.) Ltd.
Vs. Income Tax Officer, ""A"" Ward and Others, cited on behalf of the assessee it was found that there had been no omission or failure on the part
of the assessee to disclose fully and truly all material facts necessary for assessment. Moreover, the Commissioner of Income Tax had by a letter
directed the Income Tax Officer that ""immediate action should be taken u/s 147"" thereby leaving no discretion to the Assessing Officer who
without the basis of his own independent satisfaction, was mechanically obeying the directions of his superior. But that is not the factual position in
the case on hand.
13. After an anxious consideration of all the aspects of the case, we are of the view that the Tribunal misdirected itself on the matter which came up
for its consideration. We answer the questions of law in favour of the Revenue and against the assessee and set aside the impugned order of the
Tribunal and restore that of the Commissioner of Income Tax (Appeals).
14. In the result, this appeal is allowed as above.