2001 (2) TMI 39 - HC - Income Tax

Reassessment for escaped income u/s147 challenged over non-service of s.148 notice; proceedings invalid despite later s.142(1) appearance

Validity of reassessment under s.147 turned on whether a notice under s.148 was duly served despite the assessee's authorised representative appearing ... Justification for initiation of proceeding u/s 147 - notice issued u/s 148 - Whether, particularly in view of the fact that the assessee approached through the authorised representative before the Assessing Officer in response to notice u/s 142(1) in the proceeding u/s 147, the assessee had sufficient notice u/s 148 of the Income-tax Act, 1961? - HELD THAT:- Service of notice prescribed by section 148 of the Income-tax Act, for the purpose of initiating the proceeding for reassessment is not a mere procedural requirement, it is a condition precedent to the initiation of a proceeding for assessment under section 147 of the Act. Mere issuance of a notice is not sufficient. In R. K. Upadhyaya v. Shanabhai P. Patel [1987 (4) TMI 5 - SUPREME COURT], the Supreme Court has pointed out that 'service under the new Act is not a condition precedent to conferment of jurisdiction on the Income-tax Officer to deal with the matter but it is a condition precedent to the making of the order of assessment'. There is no material to show that the employee appeared in pursuance of a notice under section 148. He appeared only in response to a notice under section 142(1) of the Act. Section 142(1) deals with enquiry before assessment and the appearance of the employee in terms of this notice to produce such accounts or documents as the Assessing Officer may require cannot be deemed to be knowledge of the proceeding under section 147 of the Act. That being the position, agreeing with the findings as quoted above, we hold that no notice was served under section 148 of the Act and the appearance of a person in response to a notice under section 142(1) of the Act cannot be deemed to be knowledge of the proceedings under section 147 of the Act. The question is accordingly answered in favour of the assessee. Accordingly, the income-tax reference shall stand disposed of. Issues involved: Assessment u/s 143(1), initiation of proceedings u/s 147(a), notice u/s 148, jurisdiction for reassessment, service of notice u/s 148, validity of assessment.Summary:The assessee filed returns for assessment years 1980-81 and 1981-82, with the Income-tax Officer completing the assessment u/s 143(1) of the Income-tax Act, 1961. Subsequently, proceedings were initiated u/s 147(a) due to income from Hullar Rice Mill assessed in an individual's name in earlier years. Despite issuance of notices u/s 148, lack of response from the assessee led to further actions. The Appellate Assistant Commissioner upheld the assessment, prompting an appeal to the Tribunal, which remanded the matter for fresh consideration. The subsequent dismissal of appeals by the Deputy Commissioner led to a second appeal before the Tribunal. After reviewing the case, the Tribunal sought a remand report and concluded that while notices u/s 148 were issued, there was no proof of service on the assessee, resulting in cancellation of the assessments for both years.The matter was referred to the High Court to determine if the assessee had sufficient notice u/s 148. The High Court emphasized that service of notice u/s 148 is a prerequisite for reassessment proceedings u/s 147, citing legal precedents. It was noted that appearance in response to a notice u/s 142(1) does not imply knowledge of proceedings u/s 147. Consequently, it was held that no notice was served u/s 148, and appearance based on a different notice does not equate to awareness of proceedings u/s 147. The judgment favored the assessee, leading to the disposal of the income-tax reference.