2004 (9) TMI 84 - HC - Income Tax

Reassessment notice - reasons were not recorded before issuing notice under section 148 but were recorded after notices have been issued and served on the assessee by ante-dating the same. - The recording of reasons before issuing notice under section 148 being a mandatory requirement for assuming jurisdiction, the Tribunal was right in holding that the reassessment proceedings have been initiated without jurisdiction in breach of the mandatory requirement and cannot fructify in valid assessment orders. Revnue s appeal against tribunal s decision is dismissed

Summary

Issues:
- Validity of notice under section 148 for reassessment proceedings.
- Requirement of recording reasons before issuing notice under section 148.
- Jurisdiction of the Assessing Officer in initiating reassessment proceedings.

Analysis:
- The High Court of Rajasthan heard an appeal against the Income-tax Appellate Tribunal's order regarding reassessment for the assessment year 1988-89. The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal on three grounds. Firstly, the Tribunal found that the notice to file a return within "30 days" instead of "not less than 30 days" was invalid due to the amendment in section 147. Secondly, the Tribunal held that the Assessing Officer lacked the necessary satisfaction for income escapement as he relied on another officer's opinion. Lastly, the Tribunal noted that reasons for initiating proceedings were not recorded as required by law. The High Court examined the record and found the third point alone sufficient to uphold the Tribunal's decision.

- The High Court emphasized the mandatory requirement of recording reasons before issuing a notice under section 148. It stated that the satisfaction of the Assessing Officer regarding income escapement is crucial before assuming jurisdiction. The court highlighted that the sufficiency of reasons is not justiciable but open to judicial review. Referring to various legal precedents, the High Court reiterated that the existence of reasons recorded by the Assessing Officer is the sole basis for proving the belief of income escapement. Failure to record reasons before issuing notice renders the proceedings invalid, as demonstrated in previous court decisions.

- Citing specific cases like CIT v. Maharaja Pratapsingh Bahadur and Union of India v. Rai Singh Deb Singh Bist, the High Court reaffirmed the importance of complying with statutory requirements in initiating reassessment proceedings. It noted that reasons supplied after issuing notice cannot validate the proceedings. The court concluded that in the present case, the reasons were recorded after issuing notices, breaching the mandatory requirement and rendering the reassessment proceedings invalid. Consequently, the High Court upheld the Tribunal's decision that the reassessment was initiated without jurisdiction, leading to the dismissal of the appeal. The court refrained from addressing the first two aspects of the matter, as the decision on them would not impact the outcome.