1964 (12) TMI 51 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notices issued under Section 147 of the Income-tax Act, 1961.
2. Jurisdiction of the Income-tax Officer to reassess based on alleged new information.
3. Whether the reassessment constituted a mere change of opinion.

Issue-wise Detailed Analysis:

1. Validity of the Notices Issued Under Section 147 of the Income-tax Act, 1961:
The petitioner-firm challenged the validity of three notices dated March 28, 1964, issued under Section 147 of the Income-tax Act, 1961, for the assessment years 1959-60, 1960-61, and 1961-62. The contention was that these notices were issued without any new information that could justify reopening the assessments. The court examined whether the respondent had any new information that could lead to a reasonable belief that income had escaped assessment.

2. Jurisdiction of the Income-tax Officer to Reassess Based on Alleged New Information:
The court scrutinized whether the respondent had "information" as required under Section 147(b) to justify the reopening of assessments. The petitioner-firm argued that all relevant facts were already disclosed during the original assessments, and the respondent did not possess any new information. The respondent claimed that during the assessment for the year 1962-63, he discovered that the petitioner-firm had diverted profits by selling goods at lower prices to Hindu undivided family firms, which were then resold at higher profits. However, the court noted that the original Income-tax Officer had access to the same books of accounts and sales ledgers, which disclosed these transactions and prices.

3. Whether the Reassessment Constituted a Mere Change of Opinion:
The court held that the reassessment notices issued by the respondent were based on the same set of facts that were already available to the original Income-tax Officer. The court emphasized that a mere change of opinion on the same facts does not constitute "information" under Section 147(b). The court observed that the original Income-tax Officer had all the necessary information to conclude whether there was any diversion of profits, and he had not drawn any such inference. The court found that the respondent's belief that there was escapement of assessment was based on a mere surmise or suspicion, rather than any new information.

Conclusion:
The court concluded that the respondent did not possess any new information that could justify the reopening of the assessments under Section 147(b). The notices issued were held to be without jurisdiction and invalid. Consequently, the court issued a writ of mandamus quashing and setting aside the notices and restraining the respondent from taking any proceedings pursuant to those notices. The respondent was also ordered to pay the costs of the petition to the petitioner-firm.