2001 (12) TMI 18 - HC - Income Tax

Reassessment Notice - taking into consideration the totality of the circumstances and the facts which have come on record it is apparent that the respondent himself is not sure as to the year of taxability and whether the said item requires to be taxed in the assessment year 1991-92 or the assessment year 1992-93. In such a situation it is not possible to agree with the stand of the Revenue that any income could be stated to have escaped the assessment for the assessment year 1991-92 as a consequence of any failure or omission on the part of the assessee. The petition is therefore allowed. The impugned notice dated October 3 1997 (annexure R) is quashed and set aside

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for assessment year 1991-92.

Analysis:
The petitioner, a partnership firm, challenged a notice under Section 148 of the Income Tax Act, 1961 for the assessment year 1991-92. The respondent issued the notice on October 3, 1997, after the four-year period from the end of the assessment year had elapsed. The petitioner contended that the reasons recorded in the notice were factually incorrect, as they did not align with the documents provided, including the acknowledgment of filing the return for the assessment year 1991-92. The respondent had also referred to an action under Section 132 of the Act, but the reasons recorded did not accurately reflect the facts available. The respondent emphasized the non-filing of the return for the assessment year 1991-92 as the basis for the notice, despite uncertainties regarding the taxability of certain income for that year.

The petitioner's counsel provided documents showing the filing of the return and other relevant information for the assessment year 1991-92. The court observed discrepancies between the reasons recorded and the actual facts presented in the documents. The respondent's assertion that income had escaped assessment solely due to the assessee's failure to file the return was questioned. The court highlighted the importance of considering relevant facts and avoiding the inclusion of irrelevant factors in decision-making.

The respondent had made a protective addition in the assessment year 1992-93 related to undisclosed income potentially relevant to the assessment year 1991-92. The uncertainty regarding the taxability of this income and the subsequent protective addition cast doubt on the justification for initiating action under Section 147 for the assessment year 1991-92. The court found that the respondent's uncertainty about the taxability of the income undermined the basis for the notice issued to the petitioner. Consequently, the court allowed the petition, quashed the notice dated October 3, 1997, and made the rule absolute with no order as to costs.