2002 (8) TMI 27 - HC - Income Tax

In this petition, the petitioner has prayed for quashing notice issued under section 148 proposing to revise its assessment for the assessment year 1997-98. - If the reasons assigned by respondent No. 1 for issuing the notice under section 148 of the Act are considered in the light of the law laid down by the Supreme Court, it is not possible to hold that he did not have any material before him for entertaining a belief that the income of the petitioner had escaped assessment. The judgments relied upon by Shri Jain are clearly distinguishable. In those cases, the Supreme Court and the Delhi High Court had the occasion to examine the matter after passing of the final orders and not at the stage of notice. Therefore, the same cannot be made the basis for quashing the notice even before the submission of the reply by the petitioner. The writ petition is dismissed

Summary

Issues:
1. Validity of notice issued under section 148 of the Income-tax Act, 1961 for revising assessment.
2. Jurisdiction of the Assistant Commissioner to reopen assessment based on alleged incorrect deduction under section 80-I.
3. Interpretation of sections 147 and 148 of the Act in light of judicial precedents.
4. Applicability of legal principles regarding reassessment notices.

Analysis:
1. The petitioner sought to quash the notice issued by the Assistant Commissioner under section 148 of the Income-tax Act, 1961, proposing to revise the assessment for the year 1997-98. The petitioner argued that the notice was ultra vires section 148 read with section 147 of the Act. However, the court did not find sufficient grounds to quash the notice at the initial stage.

2. The Assistant Commissioner had reopened the assessment based on the belief that the petitioner was not eligible for the deduction under section 80-I of the Act, which had been wrongly allowed during the previous assessment. The court examined the reasons provided by the Assistant Commissioner and found that there was a prima facie case for reassessment, as the income chargeable to tax had allegedly escaped assessment due to the incorrect deduction.

3. The court delved into the ambit and scope of sections 147 and 148 of the Act, citing the Supreme Court's decision in Phool Chand Bajrang Lal v. ITO. It emphasized that the Income-tax Officer can reopen an assessment if there is specific, reliable, and relevant information indicating that the assessee failed to disclose material facts necessary for assessment. The court highlighted that the purpose of section 147 is to prevent parties from evading tax liabilities by providing false information during the original assessment.

4. Referring to judgments like Raymond Woollen Mills Ltd. v. ITO, the court reiterated that at the notice stage, the focus should be on whether there is a prima facie case for reassessment, rather than delving into the sufficiency or correctness of the material relied upon by the assessing authority. Previous cases where similar notices were challenged were dismissed as premature, emphasizing the importance of allowing the assessment process to unfold before challenging the notice.

In conclusion, the court dismissed the writ petition, allowing the petitioner to raise objections, including jurisdictional concerns, in their reply to the notice. The judgment underscored the importance of following legal procedures and allowing the assessment process to proceed before challenging the validity of notices issued under the Income-tax Act.