2004 (8) TMI 69 - HC - Income Tax

Notice u/s 148 interest on enhanced compensation - reassessment notices under section 148 of the Act have been issued in consequence of the order passed by the Punjab and Haryana High Court awarding interest on the amount of compensation paid to the petitioner Revenue submitted that in view of the provisions of section 150(1) and (2) of the Act, the notices in question are well within limitation as the same have been issued in consequence of the order passed by the court in the land acquisition proceedings - In the counter affidavit, the reason for issuing the notices under section 148 of the Act for the assessment years 1989-90 to 1994-95 has been stated that the interest income has escaped assessment and that is why notices have been issued. It may be mentioned here that the reasons are not required to be recorded in the notice issued under section 148 of the Act but before issuing notice the reasons ought to be recorded in writing. Thus, the plea that the notices do not contain any reasons is misconceived. - assessee s appeal dismissed

Issues Involved:
1. Validity of notices issued under section 148 of the Income-tax Act, 1961.
2. Limitation period for issuing notices under sections 149(1)(b) and 150(1) and (2) of the Act.
3. Requirement of recording reasons before issuing notices under section 148(2) of the Act.
4. Applicability of section 150(1) of the Act in the context of reassessment in consequence of court orders.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148 of the Income-tax Act, 1961:
The petitioner challenged the notices issued by the Income-tax Officer on the grounds that they were barred by the limitation period and that no reasons were recorded as required under section 148(2) of the Act. The court found that the notices were issued in consequence of the order passed by the Punjab and Haryana High Court awarding interest on compensation to the petitioner. The court held that the action taken by the Income-tax Officer was valid and within jurisdiction.

2. Limitation Period for Issuing Notices Under Sections 149(1)(b) and 150(1) and (2) of the Act:
The petitioner argued that the notices were barred by limitation as provided under sections 149(1)(b) and 150(1) and (2) of the Act. The court referred to the Supreme Court's decision in K.M. Sharma v. ITO [2002] 254 ITR 772, which clarified that the amendment to section 150(1) of the Act, effective from April 1, 1989, lifted the bar of limitation for assessments or reassessments in consequence of court orders. The court concluded that since the assessment years involved (1989-90 to 1994-95) were after the amendment, the notices were within the limitation period.

3. Requirement of Recording Reasons Before Issuing Notices Under Section 148(2) of the Act:
The petitioner contended that no reasons were recorded before issuing the notices under section 148 of the Act. The court clarified that while reasons are not required to be mentioned in the notice itself, they must be recorded in writing before issuing the notice. The court found that the reasons for issuing the notices were stated in the counter affidavit, indicating that the interest income had escaped assessment. Thus, the court held that the requirement of recording reasons was fulfilled.

4. Applicability of Section 150(1) of the Act in the Context of Reassessment in Consequence of Court Orders:
The petitioner argued that the provisions of section 150(1) of the Act were not applicable as the reassessment was not in consequence of any court order. The court disagreed, stating that the reassessment notices were issued in consequence of the Punjab and Haryana High Court's order awarding interest on compensation. The court referred to the Patna High Court's decision in Gauri Shankar Choudhary v. Addl. CIT [1998] 234 ITR 865 and the Kerala High Court's decision in CIT v. Vaikundom Rubber Co. Ltd. [2001] 249 ITR 19, which supported the view that reassessment can be made in consequence of court orders if it relates to the assessee in question.

Conclusion:
The court dismissed the writ petition, holding that the notices issued under section 148 of the Income-tax Act were valid, within the limitation period, and in compliance with the requirement of recording reasons. The reassessment was justified as it was in consequence of the court order awarding interest on compensation. The parties were ordered to bear their own costs.

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