TaxTMI 
TaxTMI 
2007 (9) TMI 219
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....owing loss of Rs. 646. Later on the Assessing Officer received the valuation report in respect of investment in the construction of hotel and restaurant building from D. C. L. T. In order to consider the cost of construction, as reported by the Departmental Valuer, the Assessing Officer issued a notice under section 148 of the Income-tax Act, 1961, on December 6, 1990. In response to the said notice, the assessee submitted a letter stating that the return filed on April 12, 1989, should be treated as a return in compliance with the notice under section 148 of the Income-tax Act. Accordingly, the Assessing Officer proceeded with the assessment. The assessee challenged the action of the Assessing Officer by preferring an appeal before the Commissioner of Income-tax (Appeals) who confirmed the action of the Assessing Officer. The assessee then moved the Tribunal by filing a second appeal on the ground that the action of the Assessing Officer in issuing notice under section 148 of the Act was not proper and valid because he had not recorded reasons and his satisfaction for issuing such notice. After considering the facts of the case, the Tribunal affirmed the action of the Assessing Of....
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....153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to. his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." 7. Section 148 of the Act deals with issuance of notice where income has escaped assessment. Section 148 reads as under "148. Issue of n....
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....ved under this section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." 8. From a bare reading of the aforementioned two provisions it is manifestly clear that the jurisdiction of the assessing authority to assess or reassess under section 147(a) of the Act is subject to the conditions that he has "reason to believe" that the assessee failed to disclose all material facts necessary for assessment for the relevant assessment year. It is also incumbent upon the Assessing Officer to comply with the mandatory requirements of section 148 which casts an obligation on him to issue notice before making any assessment or reassessment and before issuance of notice he must record his reasons. 9. The question referred in this case is no longer res integra. In the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC), the assessee challenged the validity of notice issued under sections 148 and 143 of the Act. While disposing of the application their Lordships of the Supreme Court observed (page 20) "We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a no....
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....f assessment as a nullity. There can be hardly any doubt in holding that the recording of the reasons is a pre-requisite to the assumption of jurisdiction by the Income-tax Officer for initiating the proceedings under section 147(a). The reasons so recorded acquire much significance when the action is taken under clause (a) of section 147 because it is only the recorded reasons which can indicate as to why the Income-tax Officer was made to believe that income has escaped assessment for the relevant assessment year. Further, the language employed in section 151 clearly leads to the conclusion that the Board or the Commissioner of Income-tax, while according sanction for issuance of notice under section 148 and for coming to an objective conclusion authorising the Income-tax Officer to take action under section 147(a), are required to confine themselves only to the reasons recorded by the Income-tax Officer. Therefore, looking at the entire scheme and purpose of the Act, I am of the considered view that the validity of the assumption of jurisdiction under section 147(a) can be tested only by reference to the reasons recorded under section 148(2) of the Act and the Income-tax Offi....
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....nbsp; Income-tax Officer. December 6, 1990 Issue notice under section 148 to consider the cost of construction as reported by the Departmental Valuer. &nbs....