1995 (12) TMI 6 - HC - Income Tax

Assessment Proceedings, Investment Allowance, Jurisdiction Of High Court, Law Applicable To Assessment, Notice Of Reassessment, Reassessment Proceedings, Rectification Of Mistakes, Rectification Proceedings, Supreme Court

Summary

Issues Involved:
1. Jurisdiction of notice issued under section 148 of the Income-tax Act, 1961.
2. Applicability of amended section 147 to assessment year 1987-88.
3. Procedural vs. substantive nature of section 147.
4. Validity of reassessment proceedings based on change of opinion.
5. Retrospective application of amendments.

Detailed Analysis:

1. Jurisdiction of Notice Issued Under Section 148:
The petitioner challenged the notice dated February 13, 1995, issued under section 148 of the Income-tax Act, 1961, for the assessment year 1987-88, arguing that the amended provisions of section 147, which came into effect on April 1, 1989, are not applicable. The petitioner contended that the notice is without jurisdiction because the power given by the amended section 147 affects a vested right and is substantive in nature.

2. Applicability of Amended Section 147 to Assessment Year 1987-88:
The petitioner argued that the amended section 147 should not apply retrospectively to the assessment year 1987-88. Reliance was placed on various judgments, including Govinddas v. ITO [1976] 103 ITR 123 (SC), which emphasized that retrospective operation should not be given to a statute unless expressly provided. The court noted that the amended section 147 introduced significant changes, including the removal of the requirement for the Income-tax Officer to have "reason to believe" or "information in possession" before taking action.

3. Procedural vs. Substantive Nature of Section 147:
The court examined whether the changes brought by the Amendment Act of 1987 to section 147 were procedural or substantive. It was observed that the object of reassessment is to assess the correct income, which is a procedural matter. The court concluded that the provisions of section 148 are procedural in nature, and changes in procedure, including limitations, do not affect vested rights. Therefore, the Income-tax Officer was competent to invoke the amended provisions for previous years that had not become time-barred.

4. Validity of Reassessment Proceedings Based on Change of Opinion:
The petitioner contended that the reassessment proceedings were based on a change of opinion, which is not permissible. The court noted that the initial assessment was made under section 143(1) and not under section 143(3) of the Income-tax Act. The court held that the reassessment proceedings were valid as they were based on the correct interpretation of the law by the apex court, which constitutes "information" under section 147(b). The court emphasized that the decision of the Supreme Court is binding under article 141 of the Constitution and can be considered as information for the purpose of section 147(b).

5. Retrospective Application of Amendments:
The court addressed the issue of whether the amendments to section 147 and related provisions, which came into effect from April 1, 1989, should apply retrospectively. The court referred to Circular No. 549 dated October 31, 1989, which clarified that the amendments are procedural and have retrospective effect. The court held that the amended provisions apply to all matters pending on April 1, 1989, and had not become closed or dead on that date. Therefore, the Income-tax Officer was justified in issuing the notice under the amended provisions.

Conclusion:
The court dismissed the writ petition, holding that the notice issued under section 148 was valid and the reassessment proceedings were within jurisdiction. The court concluded that the amended provisions of section 147 are procedural in nature and apply retrospectively to pending matters. The petitioner has the remedy of filing an appeal under the Income-tax Act, which provides an efficacious machinery for addressing grievances.