1992 (8) TMI 38 - HC - Income Tax

Opportunity to be heard essential before initiating reassessment proceedings.

Multimetals Limited Versus Union Of India And Others. (and Other Writ Petitions)

Multimetals Limited Versus Union Of India And Others. (and Other Writ Petitions) - [1993] 201 ITR 166, 106 CTR 147 Issues Involved:1. Validity of the notice under section 148 of the Income-tax Act, 1961.2. Jurisdiction of the Income-tax Officer under section 147(a) of the Act.3. Compliance with the conditions precedent for reassessment.4. Adequacy of reasons for reopening the assessment.5. Disclosure of reasons for reassessment to the petitioner.6. Allowability of development rebate, depreciation, and commission expenses.Issue-wise Detailed Analysis:1. Validity of the Notice under Section 148 of the Income-tax Act, 1961:The petitioner-company received a notice under section 148 of the Act dated March 21, 1980. The petitioner challenged the validity of this notice, arguing that it was issued without proper reasons and was invalid. The petitioner requested the Income-tax Officer to disclose the reasons for the reassessment, but the Officer instead called upon the petitioner to file a fresh return.2. Jurisdiction of the Income-tax Officer under Section 147(a) of the Act:The petitioner contested the jurisdiction of the Income-tax Officer, asserting that the Officer had no reason to believe that income chargeable to tax had escaped assessment due to any omission or failure on the part of the petitioner to disclose fully and truly all material facts. The court directed the Income-tax Officer to bring on record the reasons for reopening the assessment, which were subsequently provided in the counter-affidavit.3. Compliance with the Conditions Precedent for Reassessment:The court examined whether the two conditions precedent for exercising jurisdiction under section 147(a) were fulfilled: (i) the Officer must have reason to believe that income has escaped assessment, and (ii) such escapement must be due to the omission or failure of the assessee to disclose fully and truly all material facts. The court noted that in the absence of these conditions, the Officer would be acting without jurisdiction.4. Adequacy of Reasons for Reopening the Assessment:The petitioner argued that the reasons for reopening the assessment were based on a change of opinion and not on any new material facts. The court considered the reasons provided by the Income-tax Officer, which included the failure to disclose fully and truly all material facts and the wrongful claims of depreciation, development rebate, and commission expenses.5. Disclosure of Reasons for Reassessment to the Petitioner:The petitioner repeatedly requested the Income-tax Officer to provide a copy of the reasons recorded for reopening the assessment. The court emphasized that the petitioner has the right to know the reasons for the reassessment to judge whether the jurisdiction has been rightly exercised.6. Allowability of Development Rebate, Depreciation, and Commission Expenses:The court examined the petitioner's claims regarding development rebate, depreciation, and commission expenses. The petitioner provided detailed explanations and evidence for these claims, arguing that they were allowed in previous assessments and reassessments. The court noted that these claims were scrutinized and allowed by the assessing authorities in the past, and any reassessment on the same material would be impermissible.Conclusion:The court concluded that the Income-tax Officer should have provided the petitioner with an opportunity to be heard before initiating reassessment proceedings. The court directed that if the Officer, after providing an opportunity, is satisfied that the issuance of the notice was justified, he may proceed with the reassessment. Otherwise, the proceedings under section 147(a) should be dropped. The writ petition was allowed, and the petitioner was awarded costs of Rs. 700.