1998 (8) TMI 79 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice issued u/s 148 of the Income-tax Act, 1961.
2. Applicability of the amended provisions of section 147 of the Income-tax Act, 1961.
3. Obligation of the assessee to disclose material facts fully and truly.
4. Jurisdiction of the Assessing Officer to reopen assessment based on suspicion or change of opinion.

Summary:

1. Validity of the notice issued u/s 148 of the Income-tax Act, 1961:
The petitioner sought quashing of the notice dated March 20, 1992, issued u/s 148 of the Income-tax Act, 1961, alleging that income chargeable to tax had escaped assessment. The petitioner contended that all material facts necessary for assessment were duly disclosed and supported by documents, and the assessment was completed after due consideration. The court held that the notice was arbitrary, illegal, and without jurisdiction as there was no new information or failure on the part of the assessee to disclose material facts.

2. Applicability of the amended provisions of section 147 of the Income-tax Act, 1961:
The respondents argued that the amended provisions of section 147, effective from April 1, 1989, should apply. However, the court clarified that the unamended provisions would govern the case since the assessment year in question was 1988-89, prior to the amendment. The court emphasized that the amended provisions could not retrospectively affect the assessment year 1988-89.

3. Obligation of the assessee to disclose material facts fully and truly:
The court reiterated that the obligation of the assessee is to disclose all material facts fully and truly, but not to disclose inferences or conclusions. Once the primary facts are disclosed, it is for the Assessing Officer to investigate and draw inferences. The court cited several precedents, including Calcutta Discount Co. Ltd. v. ITO and Madnani Engineering Works Ltd. v. ITO, to support this view.

4. Jurisdiction of the Assessing Officer to reopen assessment based on suspicion or change of opinion:
The court held that the Assessing Officer cannot reopen an assessment based on mere suspicion or change of opinion on the same set of facts. The court found that the reasons provided by the Assessing Officer for reopening the assessment were based on suspicion rather than belief, which is insufficient for invoking section 148. The court emphasized that "reason to believe" is distinct from "reason to suspect."

Conclusion:
The court quashed the impugned notice dated March 20, 1992, u/s 148 of the Income-tax Act, 1961, and allowed the writ petition without any order as to costs. The decision was concurred by both judges.