2005 (9) TMI 32 - HC - Income Tax

Validity of Income-tax Act Notice Upheld in Assessment Reopening Case

Dinesh Chand Jain Versus Deputy Commissioner of Income-Tax.

The court dismissed the writ petition challenging the validity of a notice issued under section 148 of the Income-tax Act for the assessment year 1995-96. ... Reassessment – notice u/s 148 - A perusal of the assessment order shows that unaccounted sales at Rs. 49,14,455 were estimated from the seized sale bill book Nos. SB-23, SB-49, SB-54, SB-56, SB-57, SB-58, SB-59 and SB-100 and the undisclosed profit at Rs. 9,74,334 was estimated on the aforesaid undisclosed sales while the notice under section 148 of the Act has been issued on the basis of seized sale bill book Nos. SB-103, SB-104 and SB-105, which relate to unaccounted sales of Rs. 93,99,100 of wah gutkha. These bills have not been considered and made the basis for estimating the unaccounted income in the original assessment proceedings. Therefore, the belief of escaped income formed on the basis of seized material, SB-103, SB-104 and SB-105 cannot be said to be without any basis. Thus, we are of the view that initiation of the proceedings under section 148 of the Act cannot be said to be without any material or based on irrelevant material. In the result, the writ petition is dismissed Issues:Reopening of assessment under section 148 of the Income-tax Act for the assessment year 1995-96 based on seized material, validity of notice issued under section 148, consideration of fresh material for forming belief of escaped income, sufficiency of material for reassessment in writ jurisdiction.Analysis:The petitioner, engaged in the business of pan masala, challenged the impugned notice dated December 9, 1998, issued under section 148 of the Income-tax Act for the assessment year 1995-96. The petitioner contended that the original assessment order considered seized material from another party, and thus, proceedings under section 147 cannot be initiated based on the same material. The appellate authority had deleted an addition in the assessment order, questioning the validity of the notice under section 148. The petitioner argued that there was no material at the time of issuing the notice to form a belief of escaped income. However, the Revenue defended the notice, stating that fresh material related to suppressed sales justified the reopening of the assessment. The court considered various precedents cited by both parties and emphasized that in writ jurisdiction, the sufficiency of material cannot be examined, only the relevance of the material to form a belief of escaped income can be assessed.In the judgment, the court referred to legal principles stating that in writ jurisdiction, the court's role is limited to determining whether there was a prima facie case for reassessment and not to evaluate the sufficiency of the material. Citing precedents like Raymond Woollen Mills Ltd. v. ITO and Ess Ess Kay Engineering Co. P. Ltd. v. CIT, the court highlighted the importance of fresh material obtained for reopening assessment proceedings. The court examined the assessment order and the reasons recorded for issuing the notice under section 148, noting that the unaccounted sales and profit estimated in the original assessment were based on different seized material compared to the material forming the basis for the notice. Consequently, the court concluded that the belief of escaped income formed on the basis of the fresh material was justified, and the initiation of proceedings under section 148 was not without basis.In the final decision, the court dismissed the writ petition, ruling in favor of the Revenue. The court found that the initiation of proceedings under section 148 of the Income-tax Act was supported by relevant and sufficient material, and hence, the notice was valid. No costs were awarded in the judgment.