1996 (7) TMI 109 - HC - Income Tax

Assessing Officer, Assessment Proceedings, Income Tax Act, Law Applicable, Reason To Believe, Reassessment Proceedings, Wealth Tax Act

Summary

Issues Involved:
1. Validity of notice under section 148 of the Income-tax Act.
2. Legality of re-initiation of assessment proceedings under section 143(2) of the Income-tax Act after issuing an intimation under section 143(1)(a).
3. Interpretation of the amended section 147 of the Income-tax Act.
4. Assessment of income related to interest-free securities and perquisites.
5. Applicability of the judgment in Apogee International Ltd. v. Union of India.

Detailed Analysis:

1. Validity of Notice under Section 148 of the Income-tax Act:
The petitioner challenged the notice under section 148 on the grounds that all necessary details regarding the tenanted premises and the deposits received from tenants had been disclosed. The petitioner argued that there was no "reason to believe" that any income chargeable to tax had escaped assessment due to failure to disclose material facts. The court noted that section 147, as amended by the Direct Tax Laws (Amendment) Act, 1987, does not require the fulfilment of conditions related to full and true disclosure of material facts for initiating reassessment proceedings. The court concluded that the reasons recorded by the Assessing Officer, such as the low rental value and interest-free securities, were sufficient to form a belief that income had escaped assessment.

2. Legality of Re-initiation of Assessment Proceedings under Section 143(2):
The petitioner contended that the issuance of a notice under section 143(2) after an intimation under section 143(1)(a) constituted a regular assessment under section 143(3), thus exhausting the Assessing Officer's power to issue another notice under section 143(2). The court referred to its previous judgment in Apogee International Ltd. v. Union of India, where it was held that an intimation under section 143(1)(a) does not oust the jurisdiction of the Assessing Officer to issue a fresh notice under section 143(2). Therefore, the court rejected the petitioner's contention and upheld the legality of the notice issued under section 143(2).

3. Interpretation of the Amended Section 147 of the Income-tax Act:
The court emphasized that the amended section 147 allows the Assessing Officer to reopen an assessment if there is reason to believe that income has escaped assessment, without the precondition of full and true disclosure of material facts. The court rejected the petitioner's argument that the Assessing Officer's belief must be tested against the failure to disclose material facts, stating that the plain language of the statute must be followed.

4. Assessment of Income Related to Interest-Free Securities and Perquisites:
The court examined whether the Assessing Officer could entertain a reasonable belief that income had escaped assessment based on information from the assessment year 1988-89. The court found that the reasons recorded by the Assessing Officer, including the low rental value and the interest-free securities, constituted sufficient material to form such a belief. The court also noted that whether the interest indicated was merely an opportunity cost or actual income was a matter to be investigated during reassessment proceedings.

5. Applicability of the Judgment in Apogee International Ltd. v. Union of India:
The court relied on its previous judgment in Apogee International Ltd. to conclude that an intimation under section 143(1)(a) does not preclude the issuance of a fresh notice under section 143(2). The court reiterated that the Assessing Officer retains the jurisdiction to issue a notice under section 143(2) if deemed necessary to ensure correct declaration of income by the assessee.

Conclusion:
The court dismissed the writ petitions, holding that the impugned notices issued under sections 148 and 143(2) of the Income-tax Act and sections 17 and 16(2) of the Wealth-tax Act were valid. The court clarified that its observations on the merits of the additions to the income were limited to determining the justification for initiating proceedings and did not preclude the petitioner from raising any factual or legal questions before the appropriate forum.