2003 (2) TMI 32 - HC - Income Tax

Validity of the notice, dated March 30, 1978, issued to the petitioner under section 147/148 of the Income-tax Act, 1961 (for short the Act ), proposing to reopen assessment for the assessment year 1973-74.- Scientific Research Expenditure - although the writ petition was admitted to hearing in the year 1979, the events taking place during the pendency of the writ petition, in particular the aforenoted order of the Tribunal, have material bearing on the reopening of the assessment for the relevant year. As a matter of fact, in our view, the said order should have been brought on record in the year 1980 when it was passed. Under the circumstances, we feel that it would be appropriate and expedient if all these subsequent events are brought to the notice of the Assessing Officer to enable him to take a decision as to whether he would still like to continue with the proceedings initiated by virtue of notice under section 148 of the Act.

Summary

Issues involved: Validity of notice under section 147/148 of the Income-tax Act, 1961 for reopening assessment for the assessment year 1973-74.

Analysis:
The judgment of the court, delivered by D.K. Jain J., concerns the challenge to the validity of a notice issued under section 147/148 of the Income-tax Act, 1961, proposing to reopen assessment for the assessment year 1973-74. The background facts reveal that the Income-tax Officer initially allowed a deduction under section 35(1)(ii) of the Act, which was later deemed erroneous by the Commissioner of Income-tax. The Commissioner directed the withdrawal of the deduction, leading to a legal battle initiated by the petitioner through a writ petition and an appeal to the Income-tax Appellate Tribunal. The Tribunal, in its order, highlighted the importance of following due process and the role of the prescribed authority in determining scientific research-related matters under section 35(3) of the Act.

The Tribunal's order, which was accepted by the Revenue, emphasized that the Commissioner's assumption of jurisdiction was not in accordance with the law. Despite the pendency of proceedings under section 263, the Income-tax Officer issued a notice to the petitioner, alleging that income chargeable to tax had escaped assessment due to an incorrect deduction. The petitioner challenged the validity of this notice through a writ petition, arguing that the Assessing Officer lacked jurisdiction to decide scientific research-related issues under section 35(1)(ii) of the Act.

In the judgment, the court acknowledged the significance of subsequent events, particularly the Tribunal's order, on the reassessment proceedings for the relevant year. The court directed the petitioner to present all subsequent events to the Assessing Officer, including objections regarding jurisdiction, for consideration before proceeding with reassessment. The court emphasized the need for the Assessing Officer to address these objections through a speaking order before continuing with the reassessment process. The court set a timeline for filing objections and instructed the Assessing Officer to dispose of them promptly.

Ultimately, the court disposed of the writ petition with the directive for the petitioner to submit objections to the Assessing Officer within a specified timeframe, ensuring a fair consideration of all relevant factors before proceeding with the reassessment. The judgment underscored the importance of due process and adherence to legal provisions in tax matters, highlighting the role of the prescribed authority in determining scientific research-related issues under the Income-tax Act, 1961.