1989 (2) TMI 97 - HC - Income Tax

Court quashes reassessment notice as conditions under Income-tax Act not met.

The court held that the conditions precedent for reopening the assessment under section 147(b) of the Income-tax Act were not satisfied as the primary ... Reassessment Issues Involved: Petition under article 226 of the Constitution of India challenging a notice issued under section 148 of the Income-tax Act, 1961 for reassessment of income for the assessment year 1981-82.Judgment Details:Reopening of Assessment: The respondent issued a notice under section 148 of the Income-tax Act, 1961, seeking to reassess the income of the petitioner for the assessment year 1981-82. The petitioner contended that the conditions precedent for the issuance of such notice were not satisfied, arguing that the notice was without jurisdiction. The respondent, however, claimed that reasons were recorded for reopening the assessment and that the action was not without jurisdiction.Reasons for Reopening: The order passed by the respondent recorded reasons for reopening the assessment, stating that the assessee-firm had not disclosed the amount of accrued interest on the Fixed Deposit Receipt for the assessment year 1981-82. The order indicated a reason to believe that income liable to tax had escaped assessment within the meaning of section 147(b) of the Act for that assessment year, prompting the issuance of the notice under section 148 of the Act.Jurisdiction for Reassessment: The court noted that two conditions precedent must be fulfilled before the Income-tax Officer can exercise jurisdiction under section 147(a) of the Act. Firstly, there must be a reason to believe that income has escaped assessment, and secondly, there must be a reason to believe that such escapement is due to the omission or failure of the assessee to disclose fully and truly all material facts necessary for assessment. The term 'material facts' refers only to primary facts. In this case, although the details relating to the amount of interest were not furnished by the assessee, the primary facts had been disclosed. Therefore, the Income-tax Officer had no jurisdiction to institute reassessment proceedings, rendering the impugned notice without jurisdiction and liable to be quashed.Final Decision: The petition was allowed, and the notice and reassessment proceedings initiated in pursuance of that notice were quashed. Each party was directed to bear their own costs, and any security amount was to be refunded to the petitioner.