2002 (2) TMI 94 - HC - Income Tax

Summary

Issues Involved:
1. Legality of proceedings u/s 147.
2. Validity of the second notice u/s 148.
3. Impact of pending appeal before the Tribunal on fresh proceedings u/s 147.

Summary:

Legality of proceedings u/s 147:
The petitioner, a partnership firm, filed its return of income for the assessment year 1991-92. A search u/s 132(1) was conducted, leading to the reopening of the assessment u/s 147 based on seized material. The Assessing Officer issued a notice u/s 148, which was challenged by the petitioner. The Commissioner of Income-tax (Appeals) quashed the notice and assessment, stating that the reasons recorded for initiating proceedings u/s 147 were invalid. The Commissioner noted that the reasons did not pertain to the income sought to be assessed, and thus, the notice u/s 148 and the subsequent assessment were quashed.

Validity of the second notice u/s 148:
The Revenue issued a fresh notice u/s 148 on February 9, 1999. The petitioner argued that the same income could not be reassessed based on the same material. The court found no merit in this contention, stating that no provision in the Act places an absolute bar on issuing a second notice u/s 148. The court emphasized that a notice quashed on technical grounds does not preclude the issuance of a fresh notice if all legal requirements are met. The reasons recorded for the second notice were different from the first, focusing on undisclosed capital derived from seized balance-sheets, thus making the second notice valid.

Impact of pending appeal before the Tribunal on fresh proceedings u/s 147:
The petitioner argued that the pending appeal before the Tribunal against the earlier quashed notice barred fresh proceedings. The court disagreed, stating that if the Revenue succeeds in its appeal, the earlier assessment would be restored, rendering the fresh proceedings redundant. The court concluded that no anomalous situation would arise, and the fresh notice u/s 148 was valid as long as the order quashing the earlier notice was in operation.

Conclusion:
The court dismissed the writ petitions, upholding the validity of the second notice u/s 148 and allowing the fresh proceedings u/s 147, with no costs awarded.