2001 (12) TMI 21 - HC - Income Tax

Reassessment, Reason To Believe - we find that the Assessing Officer has in fact recorded reasons on August 31, 1999, for issuing notice under section 148(1). We may say that the reasons mentioned by him do not suffer from any infirmity. The belief entertained by the Assessing Officer is clearly based on reasons which have bearing on the matter. Further, Sub-section (2) of section 148 clearly provides that the Assessing Officer shall, before issuing any notice thereunder record his reasons for doing so. We have already held above that the Assessing Officer has recorded necessary reasons in support of the belief. The question is whether an assessee can demand a copy of the Assessing Officer s reasons along with the notice. The proceedings in the back assessment begin only with the issue of notice under section 148. It is only after the service of notice, the assessee becomes a party to the proceedings. Consequently, the assessee is not entitled to get copy of the same at the stage of issuance of notice. In the result, the writ application deserves dismissal. We order accordingly.

Summary

Issues:
Quashing of notice under section 148 of the Income-tax Act, 1961 for reassessment of income for assessment years 1997-98 and 1998-99 based on reasons to believe that income has escaped assessment. Contention regarding the necessity of recording reasons before issuing notices under section 148 and the demand for furnishing recorded reasons to the assessee.

Analysis:
The petitioner, a partnership firm, sought to quash the notice dated August 31, 1999, issued under section 148 for reassessment of income for the years 1997-98 and 1998-99. The petitioner argued that the notices were invalid as no reasons were recorded, a prerequisite for reopening an assessment. The Income-tax Officer, on the other hand, justified the notices based on a survey conducted due to fluctuating profit rates and incomplete records. The petitioner contended that recorded reasons should be furnished before filing a return, while the Revenue argued they can only be provided post the appearance pursuant to the notices.

Regarding the first contention, the court examined sections 147 and 148 of the Income-tax Act. It emphasized that the Assessing Officer must have a valid reason to believe income has escaped assessment, which must be rational and based on relevant material. Upon review of records, it was found that reasons were indeed recorded on August 31, 1999, and were deemed valid and relevant. Thus, the court dismissed the first contention raised by the petitioner.

Concerning the second contention, the court referred to section 148(2), which mandates the recording of reasons before issuing notices. It concluded that the assessee cannot demand a copy of the reasons at the notice issuance stage since the back assessment proceedings commence post notice service, making the assessee a party to the proceedings. Therefore, the court found no merit in the demand for furnishing recorded reasons along with the notice.

In conclusion, the court dismissed the writ application, upholding the validity of the notices issued under section 148 for reassessment. The judgment was agreed upon by both judges, leading to the application's dismissal.