1977 (3) TMI 12 - HC - Income Tax

Calcutta High Court Upholds Dismissal of Income Tax Notices for Lack of Grounds

Income-Tax Officer, ´C´ Ward, Companies District III, Calcutta And Others Versus Hongkong And Shanghai Banking Corporation

Income-Tax Officer, ´C´ Ward, Companies District III, Calcutta And Others Versus Hongkong And Shanghai Banking Corporation - [1978] 115 ITR 582 Issues:Validity of notices issued under section 148 of the Income Tax Act, 1961 for reopening assessments of the assessee for the years 1950-51 to 1960-61.Detailed Analysis:The High Court of Calcutta heard an appeal by the department against a judgment quashing notices issued by the Income Tax Officer (ITO) under section 148 of the Income Tax Act, 1961, for reopening assessments of the assessee, Hongkong and Shanghai Banking Corporation, for the years 1950-51 to 1960-61. The department's appeal was based on the contention that the ITO was entitled to act based on the fact that the assessee claimed the same expenses in foreign countries as deductions in India, leading to the belief that these expenses were not allowable deductions in India. However, the court found that there was no material to support the ITO's belief that the income had escaped assessment due to the assessee's failure to disclose all material facts. The court observed that the recorded reasons and affidavits provided by the department did not establish the necessary grounds for reopening the assessments.The court highlighted the conduct of the department, noting that the inclusion of an incorrect affidavit in the appeal papers raised concerns about the department's actions. The court dismissed the appeal initially when the department failed to explain the inclusion of the incorrect affidavit. Subsequently, the department sought to recall the dismissal order, arguing that their counsel had no authority to not proceed with the appeal, causing prejudice to the department. The court granted the department's request to recall the order, allowing the appeal to be restored to the list and permitting the filing of a supplementary paper book containing the correct affidavit.In analyzing the merits of the appeal, the court emphasized that the principles of law regarding the validity of notices issued under section 148 were well-settled. The court agreed with the trial judge's conclusion that the impugned notices for reopening assessments were unjustified, as there was no evidence to support the belief that the income had escaped assessment due to the assessee's failure to disclose material facts. The court further explained that the queries raised by the ITO and the responses provided by the assessee indicated full disclosure of relevant information, negating the claim of non-disclosure by the assessee.Ultimately, the court found no merit in the department's appeal and dismissed it, quashing any assessments made pursuant to the notices. The judgment highlighted the importance of full disclosure of material facts by the assessee and the lack of sufficient grounds for the ITO to reopen the assessments. Justice Bimal Chandra Basak agreed with the decision to dismiss the appeal, and no costs were awarded in the case.