1972 (8) TMI 28 - HC - Income Tax

Supreme Court: No Jurisdiction for Reassessment

Shanmugasundaram Textiles Versus Third Income-Tax Officer, Circle I, Salem.

The Supreme Court held that the Income-tax Officer lacked jurisdiction to initiate reassessment proceedings under section 147 of the Income-tax Act. The ... This is a petition for the issuance of a writ in the nature of prohibition restraining the respondent from pursuing the reassessment proceedings in pursuance of the notice issued by him under section 148 of the Income-tax Act, 1961. Issues:- Validity of notice issued under section 148 of the Income-tax Act, 1961 for reassessment.- Requirement of full disclosure of material facts by the assessee for assessment.- Jurisdiction of the Income-tax Officer to initiate reassessment proceedings under section 147.Analysis:The judgment pertains to a petition seeking a writ of prohibition against the respondent from pursuing reassessment proceedings under section 148 of the Income-tax Act, 1961. The petitioner, a dissolved partnership firm, had filed its return of income for the assessment year 1960-61, including details of imported art silk. The Income-tax Officer accepted the return and completed the assessment without further inquiry. However, a notice under section 148 was later issued, alleging an escapement of income. The petitioner challenged the validity of the notice, arguing that all necessary materials were disclosed during the original assessment, and there was no basis for reassessment.The petitioner contended that the respondent failed to provide any material showing incomplete or false disclosure by the petitioner during the original assessment. The counter-affidavit only highlighted the absence of specific details related to import licenses and other particulars, without demonstrating any under-assessment due to these omissions. Citing relevant Supreme Court decisions, the petitioner emphasized that the duty of disclosure by the assessee extends only to providing material facts, not drawing inferences for the Income-tax Officer. The Supreme Court's stance on the obligation of the assessee to establish the truth of disclosed facts was reiterated.The judgment emphasized that the Income-tax Officer must have a prima facie belief of income escapement before initiating reassessment proceedings. In this case, the Income-tax Officer's doubts regarding the imported art silk's utilization were not substantiated with clear evidence or reasoning in the counter-affidavit or assessment records. The court noted the lack of material demonstrating income escapement, leading to the conclusion that the initiation of proceedings under section 147 was without jurisdiction. Consequently, the writ petition was allowed, and the petitioner was granted costs. The judgment highlighted the necessity for the Income-tax Officer to establish a prima facie case of income escapement before issuing reassessment notices under the Income-tax Act.