2002 (6) TMI 27 - HC - Income Tax

Reassessment Condition Precedent - notices under section 148 - petitioner challenges the said notices on the ground that the requirements under section 147 have not been satisfied and therefore such notices issued after the expiry of four years from the end of the relevant assessment year in each case are time barred as in the present case for each of the years there was assessment under sub-section (3) of section 143 of the Income-tax Act. - I am of the opinion that in the absence of satisfaction of one of the statutory requirements as contained in section 147 the notices impugned under section 148 cannot be held to be valid as they were issued after the expiry of four years from the last date of the concerned assessment year and there was an assessment under section 143(3) in respect of the assessee. - Therefore the notices are barred by time in view of the provision of law as discussed hereinabove. The writ petition is allowed.

Summary

Issues:
Challenging notices under section 148 of the Income-tax Act for assessment years 1984-85, 1987-88, and 1989-90 based on the satisfaction of requirements under section 147.

Analysis:
The petitioner challenged the notices under section 148, arguing that the requirements under section 147 were not satisfied, rendering the notices time-barred. The contention was that the notices were issued for reopening assessments based on a legal explanation regarding investment allowance for civil contractors, which was not a valid ground under section 147. The petitioner's counsel referred to legal precedents such as Calcutta Discount Co. Ltd. v. ITO and Coca-Cola Export Corporation v. ITO to support the argument that the conditions in section 147 were not met. The respondents, however, argued that similar cases had been decided based on the same legal explanation, justifying the issuance of notices. Reference was made to the scope of section 147 as per the decision in Sri Krishna Pvt. Ltd. v. ITO.

The court analyzed the requirements for issuing notices under section 148 in relation to section 147 of the Income-tax Act. It noted that for a notice to be valid, two conditions must be satisfied: escapement of income chargeable to tax and failure on the part of the assessee to disclose all material facts necessary for assessment. The court emphasized that the mere escapement of assessment, based on a subsequent legal explanation, was not sufficient. It was essential to establish the failure to disclose material facts. The court rejected the argument that, at the notice issuance stage, the sufficiency of materials should not be assessed, emphasizing that the court must consider the existence of allegations when a notice is challenged.

The court compared the present case with previous judgments like Geo Miller and Co. Ltd. and Simplex Concrete Piles (India) Pvt. Ltd., where it was found that both conditions under section 147 were satisfied for issuing notices under section 148. In contrast, in the present case, the court found that the second condition of failure to disclose material facts was not alleged or demonstrated by the respondents. Consequently, the court held that the notices were time-barred as they were issued after the expiry of four years from the relevant assessment years and in the absence of satisfying one of the statutory requirements under section 147.

In conclusion, the court allowed the writ petition, quashing the impugned notices under section 148 as they were deemed invalid due to being time-barred and not meeting the requirements under section 147. All parties were instructed to act based on a signed copy of the judgment.