Tax reassessment notices u/s148 after full disclosure, challenged as change of opinion; notices quashed for no "reason to believe".

Reassessment notices under s.148 were challenged as being issued without "reason to believe" under s.147 and amounting to a mere change of opinion. The HC held that the assessee had fully and truly disclosed all material facts during the original assessment, and the assessing authority had already considered the income for the relevant year. The recorded reasons did not disclose any objective material capable of forming the requisite belief and reflected, at most, suspicion or reappraisal of the same facts; such action is without jurisdiction and cannot be supported by reasons beyond those recorded. Consequently, the impugned s.148 notices were quashed and the writ petitions were allowed.

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Issues involved: Validity of notices issued under section 148 of the Income-tax Act for the assessment year 1988-89.

Summary:
The petitioners, who were partners of a firm, challenged the notices issued under section 148 of the Income-tax Act for the assessment year 1988-89, claiming that income had "escaped assessment." The petitioners received amounts from the Daman Ganga Dam arbitration, which they considered as capital receipts not liable to tax. The Assessing Officer, however, assessed the entire amount received on account of the Daman Ganga Dam Construction in the firm's name. The petitioners contended that the reasons for issuing the notices were based on a change of opinion and lacked objective satisfaction. The Income-tax Officer's belief that income had escaped assessment did not mention a relevant judicial decision. The court held that the notices were unsustainable as the assessing authority was aware of all facts, and no valid reason was provided for issuing the notices. The court quashed the notices, ruling in favor of the petitioners.

The court noted that the assessing authority should have a valid reason to believe before issuing notices under section 148 of the Income-tax Act, emphasizing that reason to believe cannot be a result of a mere change of opinion. The court highlighted the importance of objective satisfaction by the officer before taking any action. Since the reasons provided did not establish an objective basis for issuing the notices and all relevant facts were disclosed to the assessing authority, the court found the notices to be unjustifiable and quashed them. The court emphasized the need for a valid and objective reason to support the issuance of such notices to prevent unnecessary harassment and prolonged legal proceedings.

In conclusion, the court allowed the petitions and quashed the notices dated March 13, 1997, issued to the applicants, without imposing any costs. The court's decision was based on the lack of a valid reason to believe that income had escaped assessment, as required under the Income-tax Act, leading to the notices being deemed unsustainable and subsequently annulled.

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