Trust's Reassessment Notice Quashed: Limitation Period Expired

The court held that the notice for reassessment issued to a trust for transferring funds without proper permissions was beyond the limitation period as the primary facts were disclosed during the initial assessment. Since the Assessing Officer failed to draw legal inferences at that time, the notice issued in 1991 was impermissible. Consequently, the court quashed the notice, ruling in favor of the petitioner trust without costs awarded.

---

---

Issues involved:
The issues involved in the judgment are related to the reassessment of income by the Assessing Officer beyond the prescribed time limit, specifically concerning the failure of the assessee to disclose all material facts necessary for assessment.

Judgment Summary:

The petitioner, a trust assessed to income-tax, filed a return of income for the assessment year 1985-86. The petitioner transferred an amount to a fund account and claimed it as exempt from income tax under section 11(2) of the Act. An objection was raised later that the trust did not obtain permission under section 11(3A) of the Act. A notice under section 148 was issued for reassessment. The petitioner challenged the notice, which was withdrawn, and a fresh notice was issued on July 29, 1991. The reasons for reassessment included the transfer of funds without proper permissions. The petitioner argued that the notice was issued after the expiry of the limitation period.

The court considered the provisions of section 147, which allow reassessment if there is a failure on the part of the assessee to disclose all material facts necessary for assessment. The duty of disclosing primary facts lies on the assessee, and once disclosed, the Assessing Officer must draw legal inferences. In this case, the primary facts regarding the fund transfer were disclosed during the assessment for the relevant year. As the Assessing Officer failed to draw legal inferences at that time, the notice issued in 1991 was beyond the limitation period.

The court concluded that since the notice was issued after the four-year limit from the relevant assessment year, it was impermissible without a failure on the part of the assessee to disclose necessary facts. Therefore, the impugned notice was quashed, and the petition was allowed with no costs awarded.

---