2000 (4) TMI 6 - HC - Income Tax

Reassessment of income escaping assessment limitation jurisdiction - four years prescribed under the proviso to section 147 have to be read with section 149 where the four years have been extended to seven years if the income chargeable that has escaped assessment is more than ₹ 50,000. The proviso to section 147 does not refer to the amount of escaped assessment. The only difference is that the notice under section 148, if issued within four years does not require any authority s sanction. But the Commissioner s sanction is required for notice issued after four years. The notice states that such sanction has been obtained. Therefore, the notice in reference to the petitioner s case cannot be held to be beyond the period of limitation.

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961; Barred by limitation; Jurisdiction of the notice.

Analysis:
The petitioner contested a notice issued under section 148 of the Income-tax Act, 1961, challenging its validity based on limitation and jurisdiction. The petitioner had previously filed an income tax return for the assessment year 1993-94, and an assessment order was issued under section 143(3) where expenses for repairs/replacement were acknowledged. The impugned notice informed the petitioner about the intention to reassess the income for the said year as it was believed to have escaped assessment under section 147. The main argument raised was that the notice was time-barred and lacked jurisdiction.

In examining the legal provisions, it was noted that section 147 allows for the reassessment of income that escaped assessment, with a limitation period specified in the proviso. Section 148 outlines the procedure for such reassessment, while section 149 sets the time limit for issuing a notice under section 148. Notably, section 149(1) extends the limitation period to seven years if the escaped income exceeds a specified amount. The court highlighted that the notice in question obtained the necessary sanction from the Commissioner, indicating compliance with the limitation period requirements.

Regarding the merits of the case, the court emphasized that the failure to examine the assessee's account books could justify reassessment under section 147. The court referred to Explanation 2 of section 147, which deems cases of under-assessed income or excessive relief as instances of escaped assessment. The judge declined to delve into the nature of the petitioner's expenditure or its assessment, as the petitioner retained the right to challenge the reassessment on its merits subsequently. The court found no grounds to intervene in the impugned order based on the circumstances presented.

A previous judgment cited by the petitioner's counsel was discussed, where the court highlighted the importance of full disclosure in relation to account details. However, the court pointed out that the cited judgment did not address the specific provisions of Explanations 1 and 2 to section 147, which clarify the concept of escaped assessment. Consequently, the court dismissed the writ petition, emphasizing that the petitioner could contest the reassessment on its merits in due course.