2005 (4) TMI 49 - HC - Income Tax

Notice u/s 148 for reopening the case whether the mandatory statutory conditions necessary for assumption of jurisdiction by the authority concerned were existing for the purpose of issuing the notice under challenge - petitioner argues that the reasons disclosed in the opposition are no reasons to empower the authority to assume the jurisdiction to reopen the case - by simply saying that he had reasons to believe that the amount of income (mentioned in the reasons) had escaped assessment, the authority would not be empowered to assume jurisdiction to initiate the proceeding. - requirement of recording reasons would not stand satisfied if without mentioning any reason the authority simply writes that he has reasons to believe that income had escaped assessment. This kind of exercise of power must be held to be an abuse of the power. I am therefore, of the view that the authority acted illegally and without jurisdiction in issuing the impugned notice to the petitioner; and hence it is liable to be set aside

Summary

Issues:
1. Validity of notice issued under section 148 of the Income-tax Act, 1961 for reopening the case regarding the assessment year 1994-95 after four years.
2. Jurisdiction of the authority to assume jurisdiction for issuing the notice under challenge.
3. Compliance with mandatory statutory conditions for assumption of jurisdiction by the authority concerned.
4. Abuse of power and lack of jurisdiction in issuing the impugned notice.

Analysis:
1. The High Court of CALCUTTA addressed the issue of the validity of the notice issued by the tax authority under section 148 of the Income-tax Act, 1961, for reopening the case regarding the assessment year 1994-95, issued after four years. The Assessing Officer had previously made an assessment order based on the revised return submitted by the petitioner. The court noted that the order granting tax benefit on the purchase of machinery for scientific research had attained finality and was not questioned by either party until the notice was issued. The court examined the reasons recorded by the Joint Commissioner of Income-tax, which indicated that income had allegedly escaped assessment. The court found that the authority lacked the power to reopen the case based on the reasons provided, leading to the decision to set aside the impugned notice.

2. The judgment delved into the jurisdiction of the authority to assume jurisdiction for issuing the notice under challenge. The court highlighted that the authority was not empowered to reopen the case merely on the ground that a claimed deduction under section 35 had been wrongly allowed. It emphasized that the requirement of recording reasons for reopening a case must be met to prevent the abuse of power. The court concluded that the authority acted illegally and without jurisdiction in issuing the notice, leading to the decision to set it aside.

3. The court thoroughly examined the compliance with mandatory statutory conditions necessary for the assumption of jurisdiction by the authority concerned. It emphasized that the authority must have valid reasons for believing that income had escaped assessment to initiate proceedings. The court scrutinized the reasons provided by the Joint Commissioner of Income-tax and found them insufficient to empower the authority to assume jurisdiction for issuing the notice. The judgment underscored the importance of adhering to statutory conditions before reopening a case under the Act.

4. Lastly, the judgment addressed the issue of abuse of power and lack of jurisdiction in issuing the impugned notice. The court emphasized that the authority's mere statement of having reasons to believe that income had escaped assessment without providing valid reasons did not satisfy the requirement of recording reasons. It deemed such an exercise of power as an abuse of authority and concluded that the notice was liable to be set aside due to acting illegally and without jurisdiction. The court allowed the writ petition and set aside the impugned notice dated September 27, 2000, without ordering costs in favor of the petitioner.