1998 (9) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice u/s 148 of the Income-tax Act, 1961.
2. Alleged failure of the assessee to disclose fully and truly all material facts necessary for assessment.
3. Justification for reassessment proceedings.

Summary:

1. Validity of the notice u/s 148 of the Income-tax Act, 1961:
The writ petitioner, a public limited company, challenged the notice u/s 148 of the Income-tax Act, 1961, issued by respondent No. 1 on September 30, 1997, for the assessment year 1990-91. The petitioner argued that the notice was issued after four years from the end of the relevant assessment year, and thus, the Income-tax Officer (ITO) should have been satisfied that any income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment.

2. Alleged failure of the assessee to disclose fully and truly all material facts necessary for assessment:
The petitioner contended that all materials required for the assessment of income were disclosed fully and truly. The Department's case was that the assessee had claimed a deduction u/s 32AB of Rs. 3,99,80,053, which was wrongly allowed by the Assessing Officer, leading to escaped income. The Department argued that the petitioner could address its grievances during reassessment proceedings and, if necessary, appeal to higher authorities.

3. Justification for reassessment proceedings:
The court examined the charts provided by both parties, which indicated the total income, deductions allowed, and excess deductions. The court noted that the deduction allowable u/s 32AB was Rs. 1,59,92,002, and there was no dispute on this figure. The court referred to various precedents, including Calcutta Discount Co. Ltd. v. ITO and Coca-Cola Export Corporation v. ITO, emphasizing that the ITO must be satisfied with the escapement of income and the assessee's failure to disclose material facts before issuing a notice u/s 148 after four years.

The court found that the assessment order and the charts did not indicate any escapement of income. The Department failed to prove that the assessee had not disclosed fully and truly all material facts. The court held that any calculation mistake could be rectified u/s 154 of the Act, but it did not justify issuing a notice u/s 148.

Conclusion:
The court quashed the impugned notice issued u/s 148, stating that the ITO could not assume jurisdiction to issue the notice based on the provisions of the Act and the facts of the case. There was no order as to costs, and all parties were to act on a signed xeroxed copy of the judgment on the usual undertaking.