2004 (11) TMI 61 - HC - Income Tax

Whether assumption of jurisdiction for making fresh assessment by the Assessing Officer was illegal because no reasons stood recorded for reopening of assessment under section 143(2)(b)? - In the cases falling u/s 147 a reasonable belief must exist that income has escaped assessment. Whereas no such ground must exist while exercising powers under section 143(2)(b) - The summary scheme envisaged under section 143 is an exception to the normal rule. In issuing such notice there is no need to record reasons and hence the assessee cannot question the issuance of notice issued by the Assessing Officer under section 143(2)(b) on the ground that no reasons were recorded prior to the issuance of notice. The only requirement is obtaining of previous approval of the Deputy Commissioner as provided in the proviso to sub-section (2).

Summary

Issues:
1. Jurisdiction for making fresh assessment by the Assessing Officer without recorded reasons under section 143(2)(b) of the Income-tax Act.

Analysis:
The judgment by the High Court of Madhya Pradesh involved a reference made by the Tribunal under section 256(1) of the Income-tax Act, 1961, regarding the jurisdiction for making a fresh assessment by the Assessing Officer without recorded reasons under section 143(2)(b) of the Act. The Court was tasked with addressing the question of law arising from the Tribunal's order related to the legality of assuming jurisdiction for making a fresh assessment without recorded reasons. The case pertained to an individual assessee for the year 1985-86, where the Assessing Officer initially accepted the returned income but later determined a higher income due to non-cooperation from the assessee during the assessment process.

The Court highlighted the distinction between cases falling under section 143(2)(b) and section 147 of the Act. It emphasized that in cases falling under section 147, a reasonable belief that income has escaped assessment is required, whereas, in cases under section 143(2)(b), no such ground is necessary. The Court noted that the summary scheme under section 143 is an exception to the normal rule, where there is no mandate to record reasons before issuing a notice under section 143(2)(b). The Court referenced the decision of the Karnataka High Court to support its view that the assessee cannot challenge the issuance of notice under section 143(2)(b) solely on the grounds of lack of recorded reasons, as the only prerequisite is the approval of the Deputy Commissioner as per the proviso to sub-section (2).

Ultimately, the Court ruled in favor of the Revenue and against the assessee, upholding the validity of the Assessing Officer's jurisdiction to make a fresh assessment under section 143(2)(b) without the need for recorded reasons. The judgment concluded by stating that no costs were to be awarded in the case.