1997 (5) TMI 16 - HC - Income Tax

Summary

Issues involved:
1. Validity of notice issued under section 148 of the Income-tax Act for the assessment year 1981-82.
2. Compliance with the provisions of sub-section (2) of section 148 regarding recording of reasons for issuing the notice.
3. Justification of the notice based on directions of the Settlement Commission.
4. Application of section 150 of the Income-tax Act in relation to the notice issued under section 148.

Validity of Notice under Section 148:
The petitioner filed a writ petition seeking to quash the notice issued under section 148 of the Income-tax Act for the assessment year 1981-82. The petitioner argued that the notice was barred by limitation as per the provisions of section 147 read with section 149 of the Act, asserting that the relevant assessment year had expired on March 31, 1992, rendering the notice invalid.

Compliance with Recording of Reasons:
The petitioner contended that the notice did not provide any reasons for the initiation of proceedings, thus violating sub-section (2) of section 148 which mandates the recording of reasons by the Assessing Officer before issuing such notice.

Justification based on Settlement Commission Directions:
The Revenue argued that the notice was issued in accordance with directions from the Settlement Commission regarding the income of the Hindu undivided family. However, it was noted that the concession made in the Settlement Commission's proceeding was not binding on the petitioner in the instant case, as it was made to protect the interests of a different party.

Application of Section 150 of the Act:
The Revenue relied on section 150 of the Act to justify the notice issued under section 148, citing the Settlement Commission's directions. However, the court found that the notice was ex facie barred by limitation for the assessment year 1981-82, and the provisions of section 150 could not be invoked to revive a proceeding that was time-barred.

Conclusion:
The High Court held that the notice issued under section 148 and the subsequent assessment were without jurisdiction due to being barred by limitation. Additionally, the non-compliance with the requirement to record reasons for issuing the notice further invalidated the proceedings. Consequently, the court allowed the writ petition, quashing the notice under section 148, the assessment order, and the demand notice.