1998 (8) TMI 64 - HC - Income Tax

Court upholds income tax reassessment in Section 148 challenge, emphasizing officer's reasonable belief.

The court dismissed the writ petition challenging the notice under Section 148 of the Income-tax Act, 1961, and subsequent assessment proceedings. It held ... Reassessment, Material Facts, Secured Advances Issues Involved:1. Validity of the notice under Section 148 of the Income-tax Act, 1961.2. Full and true disclosure of material facts by the petitioner.3. Limitation period for issuing notice under Section 148.4. Requirement of sanction under Section 151 of the Act for issuing notice.Detailed Analysis:1. Validity of the Notice under Section 148 of the Income-tax Act, 1961The petitioner, a partnership firm, sought quashing of the notice dated March 12, 1993, under Section 148 of the Income-tax Act, 1961, and a restraint order against the Income-tax Officer from making assessments pursuant to the notice dated September 1, 1993, under Section 142(1) of the Act. Despite the assessment order being passed and the appeal dismissed, the court confined itself to the validity of the impugned notice under Section 148. The court noted that the petitioner had shown a sum of Rs. 1,40,552 as a secured advance in the balance sheet, which was disputed by the CPWD, stating the amount had been realized through bill adjustments on March 31, 1986. The petitioner contended that the reassessment was based on incorrect information from the CPWD.2. Full and True Disclosure of Material Facts by the PetitionerThe petitioner argued that it had made a full and true disclosure of its income, supported by documents, and the assessment order was passed after necessary inquiry under Section 143(3). However, the court observed that the correctness of the documents or information leading to the reassessment could not be assumed. The court emphasized that merely producing books of account does not necessarily amount to full and true disclosure as per Section 147(a) and its Explanation 2. The court found it prima facie difficult to accept the plea of full and true disclosure due to contradictory statements from the CPWD.3. Limitation Period for Issuing Notice under Section 148The petitioner argued that the reassessment notice was barred by limitation under Section 149 as it stood before its amendment in 1989. The court, however, noted that it could not definitively say there was full and true disclosure of material facts and that the sufficiency of the materials leading to the notice was not within its purview. The court also rejected the contention regarding the amount of income that allegedly escaped assessment, stating that the notice was issued within the permissible period of seven years from the end of the relevant assessment year, as per Section 149(1)(a)(ii).4. Requirement of Sanction under Section 151 of the Act for Issuing NoticeThe petitioner contended that notice under Section 148 could only be issued with the sanction of the Chief Commissioner or the Commissioner of Income-tax. The respondents asserted that the Commissioner had given his sanction after due application of mind. The court rejected the petitioner's submission in this regard, affirming that the necessary sanction had been obtained.Conclusion:The court dismissed the writ petition, holding that the notice under Section 148 and the subsequent notice under Section 142(2) did not require interference. The court found that the assessment was reopened based on information suggesting that income chargeable to tax had escaped assessment, and the formation of belief by the Assessing Officer was reasonable. The court emphasized that it is not the role of the High Court in writ jurisdiction to investigate the sufficiency or correctness of the materials leading to the notice.