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Issues Involved:
1. Validity of the notice issued u/s 148 of the Income-tax Act, 1961. 2. Compliance with the preconditions for issuing a notice u/s 148 beyond four years. 3. Jurisdictional error and the necessity of recording reasons for belief of income escapement. Summary of Judgment: 1. Validity of the Notice Issued u/s 148: The petitioner challenged the notice issued by the respondent u/s 148 of the Income-tax Act, 1961, for the assessment year 1989-90, which was issued more than six years after the end of the relevant assessment year. The petitioner argued that the preconditions for issuing such a notice were not satisfied, rendering the proceedings initiated by the notice wholly without jurisdiction. 2. Compliance with Preconditions for Issuing Notice Beyond Four Years: The petitioner contended that all material facts necessary for the assessment were fully and completely disclosed during the original assessment. The respondent's reasons for reopening the assessment included excessive deductions allowed u/s 80HHC and 32AB, and understatement of profits due to Modvat adjustments. However, the court found that these reasons did not establish any failure on the part of the petitioner to disclose material facts fully and truly. The court emphasized that for notices issued beyond four years, the Assessing Officer must record both the belief that income has escaped assessment and the default or failure by the assessee to disclose material facts. 3. Jurisdictional Error and Necessity of Recording Reasons: The court held that the notice issued u/s 148 was vitiated due to the failure of the Assessing Officer to record the necessary satisfaction that the income had escaped assessment due to the assessee's failure to disclose material facts. The court referred to the proviso to section 147, which mandates that such failure must be recorded for the notice to be valid. The court also noted that any error in the original assessment was attributable to the Assessing Officer and not to the petitioner. Conclusion: The court quashed the impugned notice and prohibited the respondent from taking any further proceedings pursuant to that notice. The writ petition was allowed with costs of Rs. 2,000.
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