2004 (9) TMI 32 - HC - Income Tax

Notice for reopening of assessment u/s 148 - In the instant case, as there was no omission or failure on the part of the assessee to disclose truly and fully all material facts in the return, as the Assessing Officer sought to reopen the assessments due to wrong interpretation of accounts by the Assessing Officer which was not permissible under section 147 of the Act to assume jurisdiction and, the writ petitioner was justified in invoking the writ jurisdiction. - Moreover, since the writ petition was entertained, has been pending and as affidavits have been exchanged, it would be iniquitous to relegate the petitioner to alternative remedy under the Act. Thus, the writ application succeeds. The notices are set aside and quashed

Issues Involved:
1. Validity of the notices issued under section 148 of the Income-tax Act, 1961, for reopening assessments for the assessment years 1992-93 and 1993-94.
2. Jurisdiction of the Assessing Officer under section 147 of the Income-tax Act, 1961.
3. Applicability of the Supreme Court judgments in similar cases.
4. Availability and appropriateness of alternative remedies under the Income-tax Act.
5. Maintainability of the writ petition under article 226 of the Constitution of India.

Detailed Analysis:

1. Validity of Notices under Section 148:
The petitioners challenged the notices dated December 31, 1998, issued by the Assessing Officer (AO) under section 148 of the Income-tax Act, 1961, for reopening assessments for the assessment years 1992-93 and 1993-94. The AO's recorded reasons for reopening were based on an "incorrect interpretation of accounts," which allegedly led to the assessee benefiting from a loss carry-forward. The court found that the recorded reasons were a verbatim reproduction of the proposal for reopening and did not indicate any failure or omission on the part of the assessee to disclose material facts.

2. Jurisdiction under Section 147:
Section 147 allows the AO to reassess income if there is reason to believe that income chargeable to tax has escaped assessment. However, if an assessment has been made under section 143(3), no action can be taken under section 147 after four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts. In this case, the assessments were made under section 143(3) and the notices were issued beyond four years. The court found no recorded failure or omission by the assessee, thus the AO did not have the jurisdiction to issue the notices under section 148.

3. Applicability of Supreme Court Judgments:
The court referred to the Supreme Court judgment in Calcutta Discount Co. Ltd. v. ITO, which mandates that both the AO's reason to believe under-assessment and the reason that such under-assessment resulted from non-disclosure of material facts must co-exist for jurisdiction under section 147. The court also cited Parashuram Pottery Works Co. Ltd. v. ITO, where the Supreme Court held that mistakes by the AO in interpreting records cannot be attributed to the assessee. The court concluded that incorrect interpretation of accounts by the AO does not confer jurisdiction to reopen assessments under section 147.

4. Alternative Remedies:
The Revenue argued that the petitioner should have availed alternative remedies under the Income-tax Act, citing the Supreme Court judgment in GKN Driveshafts (India) Ltd. v. ITO. However, the court distinguished this case, noting that the reopening was based on incorrect interpretation of accounts, which is not permissible under section 147. The court also referred to several judgments, including Calcutta Discount Co. Ltd., which allow for writ petitions when an authority acts without jurisdiction.

5. Maintainability of the Writ Petition:
The court held that the writ petition was maintainable under article 226 of the Constitution of India. The court cited judgments that support invoking writ jurisdiction when an authority acts without jurisdiction, causing unnecessary harassment. Since the conditions for assuming jurisdiction under section 147 were not met, the court found it appropriate to intervene. The court also noted that the writ petition had been pending, and affidavits had been exchanged, making it inequitable to relegate the petitioner to an alternative remedy.

Conclusion:
The writ application succeeded. The court set aside and quashed the notices dated December 31, 1998, under section 148 of the Income-tax Act, and any consequent orders of assessment made during the pendency of the writ petition were also quashed. The court did not award any costs and directed that urgent xerox certified copies of the judgment be given to the appearing parties on a priority basis.

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