1995 (1) TMI 17 - HC - Income Tax

Assessment Proceedings, Failure To Disclose Material Facts, Minor Child, Reassessment Proceedings, Total Income

Issues:
1. Validity of order under section 143(1) of the Income-tax Act, 1961
2. Justification of addition of minor children's income in petitioner's assessment
3. Legality of notice under section 148 of the Income-tax Act
4. Assessment beyond the permissible period under section 153(1)(a)(iii) of the Act

Analysis:

1. The petitioner challenged the order dated December 22, 1978, passed under section 143(1) of the Income-tax Act, 1961, seeking to quash the order, notice under section 148 dated March 26, 1984, notice of demand, and final notice. The petitioner argued that the assessment included income of minor daughters, which the petitioner believed was not applicable for the assessment year 1976-77. The court noted that the Assessing Officer did not decide on the objections raised by the petitioner, leading to the issuance of a notice under section 148 by another officer. The court found the notice under section 147 issued by the authority to be without jurisdiction as all facts were disclosed in the return under section 139, and objections were raised but not addressed by the Assessing Officer.

2. The petitioner contended that the addition of minor children's income in her assessment was unjustified. The court observed that the Assessing Officer failed to address the petitioner's objections and did not make a decision within a reasonable time, as required by the law. The court highlighted that the petitioner had filed an application under section 143(2)(a) of the Act, which obligated the Assessing Officer to dispose of the application and stated that the petitioner could not be deemed a defaulter as per the proviso of the Act. The court concluded that the notice under section 147 was issued erroneously as none of the conditions for such notice were met.

3. The legality of the notice under section 148 of the Income-tax Act was questioned by the petitioner, arguing that the notice was not maintainable as the petitioner had filed a return under section 139 disclosing all facts. The court agreed with the petitioner's argument, emphasizing that the notice issued under section 147 was not justified due to the petitioner's compliance with the disclosure requirements under the law. The court ruled that the notice and subsequent recovery order were without jurisdiction and quashed them.

4. Regarding the assessment beyond the permissible period under section 153(1)(a)(iii) of the Act, the court upheld the petitioner's argument that no assessment could be made beyond two years. The court noted that the application filed by the petitioner under section 143(2)(a) was not decided within the stipulated time, and recovery actions were initiated after a significant delay. The court emphasized that the delay in decision-making by the authorities could not prejudice the taxpayer, leading to the conclusion that the recovery notice was also invalid. Consequently, the court allowed the writ petition, quashed the notices/orders, and directed the refund of any security deposited by the petitioner.

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