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Issues: (i) Whether a notice under Section 148 of the Income-tax Act, 1961 could be issued while assessment proceedings pursuant to an order under Section 263 of the Income-tax Act, 1961 were still pending and the issues formed the subject matter of revision. (ii) Whether the sanction granted under Section 151 of the Income-tax Act, 1961 was valid.
Issue (i): Whether a notice under Section 148 of the Income-tax Act, 1961 could be issued while assessment proceedings pursuant to an order under Section 263 of the Income-tax Act, 1961 were still pending and the issues formed the subject matter of revision.
Analysis: The assessment had been set aside under Section 263 with a direction for fresh verification and the reassessment proceedings were still in progress when the notice under Section 148 was issued. The notice covered matters that were already the subject matter of revision. So long as assessment proceedings on those issues remained pending and had not culminated in a final order, there could be no valid basis to form a belief that income had escaped assessment.
Conclusion: The notice under Section 148 was invalid and could not be sustained.
Issue (ii): Whether the sanction granted under Section 151 of the Income-tax Act, 1961 was valid.
Analysis: The parties were in agreement that the sanction accorded for issuance of the notice was invalid.
Conclusion: The sanction under Section 151 was invalid.
Final Conclusion: The reassessment notice and the supporting sanction were held unsustainable, and the writ petition was disposed of in favour of the assessee.
Ratio Decidendi: Reassessment under Sections 147 and 148 cannot be initiated for issues that are still pending in assessment or revision proceedings, because no escapement of income can be said to have occurred until those proceedings culminate in a final order.
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