2003 (3) TMI 22 - HC - Income Tax

Reassessment notice reasons for issuance of notices - it is apparent from the copies and documents placed on record by the respondents that these additional reasons have been inserted in annexures R/2 and R/3 (reasons supplied for issuing notice in reply of writ petition) but it appears that these handwritten contents bear no initial of any officer - Despite an objection of the petitioner, the original record was not placed before this court, therefore, even if the documents as a whole are not treated as void documents because of material alteration and only handwritten part of annexures R/2 and R/3 which are without initials of the officer and which is alleged to have been inserted afterward only are ignored, the other reasons recorded in the said annexures R/2 and R/3 cannot be accepted as valid good reasons for issuance of notices under section 148 as these reasons are factually wrong. Notices are declared to be without jurisdiction and quashed.

Summary

Issues:
Challenge to notices issued under the Income-tax Act, 1961 for assessment years 1984-85 and 1985-86.

Analysis:
The petitioner challenged the notices issued under the Income-tax Act, 1961 for the assessment years 1984-85 and 1985-86. The petitioner contended that the recording of reasons for the issuance of notice under section 148 of the Act is mandatory. The petitioner argued that all material facts were disclosed truly and correctly, even recorded in the composition of total income submitted in 1985. The petitioner claimed that the reasons supplied with the reply were void documents, materially altered by inserting new facts not available when the reasons were recorded. The petitioner also highlighted the failure of the respondents to produce relevant documents despite court directions, requesting the quashing of notices based on this ground alone.

The respondents justified the reopening of assessments for non-disclosure of various expenditures, including F.D.R., car sale proceeds, daughter's marriage expenses, household expenses, and house construction costs. The respondents argued that undisclosed income was used for these expenditures, which came to light during the search. The petitioner disputed the F.D.R. amount considered for reopening the assessment, clarifying it was Rs. 50,000, not Rs. 5 lakhs. The respondents failed to produce the original record, and the petitioner relied on a Supreme Court judgment for drawing an adverse inference due to non-production of relevant records.

Upon perusing the documents and arguments, the court found discrepancies in the reasons recorded by the respondents for issuing notices. The court noted that the F.D.R. of Rs. 50,000 was incorrectly treated as Rs. 5 lakhs, leading to a factual error in assuming undisclosed income. The amount related to the car sale proceeds was disclosed in the return, rendering the issuance of notices invalid. The court observed that additional reasons inserted in the notices were factually wrong, with handwritten contents lacking officer initials. Despite objections, the original record was not produced, leading the court to declare the notices as without jurisdiction and quash them.

In conclusion, the court allowed the writ petition, declaring the notices dated February 15, 1988, as without jurisdiction and quashed them based on the discrepancies and factual errors in the reasons provided for reopening the assessments.