1996 (1) TMI 59 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notice u/s 148 of the Income-tax Act, 1961.
2. Disclosure of primary facts by the assessee.
3. Applicability of old vs. amended section 147.
4. Reassessment proceedings based on new information.

Summary:

1. Validity of Notice u/s 148:
The legal heir of the late Shri R. S. Agarwal (the assessee) challenged the notice dated August 2, 1991, issued by the Assistant Commissioner of Income-tax, Central Circle-12, New Delhi, u/s 148 of the Income-tax Act, 1961, proposing to reassess income for the assessment year 1987-88 on the grounds of income escaping assessment.

2. Disclosure of Primary Facts by the Assessee:
The assessee claimed that all primary facts necessary for the assessment were disclosed, including the lease/rent deeds and balance-sheet. However, the Revenue contended that the facts regarding interest-free securities were not disclosed, which came to light only during the assessment proceedings for the subsequent year (1988-89).

3. Applicability of Old vs. Amended Section 147:
The court discussed whether the old section 147 or the amended section should apply. The old section required both conditions of the Assessing Officer having reason to believe that income had escaped assessment and such escapement being due to the assessee's failure to disclose fully and truly all material facts. The amended section required only the first condition. The court decided that even under the old section, the conditions for reassessment were met.

4. Reassessment Proceedings Based on New Information:
The court found that the assessee did not disclose the material facts truly and fully necessary for the assessment, particularly regarding the interest-free securities. The court held that mere production of documents without pointing out relevant entries does not amount to full disclosure. The reassessment proceedings were justified based on the new information obtained during the subsequent year's assessment.

Conclusion:
The court upheld the validity of the notice u/s 148 and dismissed the writ petition with costs of Rs. 2,500. The court clarified that the observations on the merits of the additions were only for determining the justification of reassessment proceedings and did not preclude the assessee from raising any questions of fact or law before the appropriate forum.