2003 (12) TMI 23 - HC - Income Tax

Validity of notice under section 148 the only ground on which the proceedings under section 147 of the Act had been initiated was that deduction under section 80-O of the Act was admissible at the rate of 50 per cent, of the net receipts and not the gross receipts, as claimed by the assessee. The case of the assessee was that the claim for deduction had duly been examined while making the assessment under section 143(3) of the Act. Thus, the reassessment proceedings were being initiated merely on a change of opinion on the same facts, which is not permissible under the Act after the expiry of four years - Impugned notice cannot be sustained and is, accordingly, quashed

Issues Involved:
1. Validity of notice under section 148 of the Income-tax Act, 1961.
2. Jurisdiction of the Assessing Officer under section 147 of the Act.
3. Requirement of failure to disclose material facts for invoking section 147 after four years.
4. Reassessment based on change of opinion.

Detailed Analysis:

1. Validity of Notice under Section 148 of the Income-tax Act, 1961:
The petitioner, an advocate, challenged the notice under section 148, issued on March 22, 2002, for the reassessment of income for the assessment year 1995-96. The notice alleged that the income chargeable to tax had escaped assessment. The petitioner claimed that the notice was never served and became aware of the proceedings only when a notice under section 142 was affixed at his business premises on January 7, 2003. The petitioner denied receipt of the section 148 notice and requested that the return already filed be treated as filed in response to the notice. He also requested the reasons for the initiation of proceedings under section 147.

2. Jurisdiction of the Assessing Officer under Section 147 of the Act:
The Assessing Officer justified the reassessment by stating that the deduction under section 80-O had been claimed on gross receipts instead of net receipts, resulting in excessive deduction. The petitioner argued that the reassessment was based on a mere change of opinion, which is not permissible after four years from the end of the relevant assessment year unless there was a failure to disclose material facts. The Assessing Officer relied on Circular No. F. 279/156/99-ITJ and various judicial pronouncements to support his decision.

3. Requirement of Failure to Disclose Material Facts for Invoking Section 147 after Four Years:
The court examined whether the Assessing Officer had validly assumed jurisdiction under section 147. It was noted that the original assessment was completed under section 143(3) on March 30, 1997, and the notice under section 148 was issued on March 22, 2002, after the expiry of four years. The court emphasized that for invoking section 147 after four years, it is necessary to show that the income escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The court found that the reasons recorded by the Assessing Officer did not allege any failure on the part of the assessee to disclose material facts, which is a "sine qua non" for assuming jurisdiction under section 147 in such cases.

4. Reassessment Based on Change of Opinion:
The court referred to various judicial pronouncements, including the judgments in Mercury Travels Ltd. v. Deputy CIT and Jindal Photo Films Ltd. v. Deputy CIT, which held that reassessment based on a mere change of opinion is not permissible. The court also noted that the Assessing Officer's reliance on the decision of the Mumbai Bench of the Income-tax Appellate Tribunal and other cases was misplaced as those cases did not involve the proviso to section 147.

Conclusion:
The court concluded that the notice under section 148 dated March 22, 2002, could not be sustained as it did not satisfy the conditions precedent for invoking jurisdiction under section 147, particularly the requirement of failure to disclose material facts. The writ petition was allowed, and the notice was quashed. No order as to costs was made.

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