1964 (2) TMI 91 - HC - Income Tax

Summary

Issues Involved:

1. Whether the intimation received by the Income-tax Officer from the Assessor and Collector of Municipal Taxes constitutes "information" under section 147(b) of the Income-tax Act, 1961, for initiating reassessment proceedings.
2. Whether the Income-tax Officer is obligated to inform the assessee about the grounds for believing that income has escaped assessment before or at the time of issuing a notice under section 148.

Issue-wise Detailed Analysis:

1. Whether the intimation received by the Income-tax Officer constitutes "information" under section 147(b):

The petitioner, an assessee owning immovable property, returned an income including Rs. 3,553 under "Income from property" based on the rateable value fixed by the Municipal Corporation. The Income-tax Officer initially accepted this value. However, in 1962, the Income-tax Officer received information from the Assessor and Collector of Municipal Taxes that the Municipal Corporation did not strictly adhere to the principle of assessing properties based on hypothetical rent, especially for owner-occupied properties, which were assessed on a concessional basis. This new information indicated that the annual value of the property was higher than previously assessed, leading the Income-tax Officer to believe that the income had escaped assessment.

The court held that this intimation constituted "information" within the meaning of section 147(b). The test applied was whether the information received was new and not just a change of opinion on the same facts or law. The court concluded that the information from the Municipal Corporation was indeed new and revealed that the previous assessment was based on incorrect assumptions. Thus, this satisfied the first condition of section 147(b).

2. Whether the Income-tax Officer is obligated to inform the assessee about the grounds for reassessment:

The petitioner argued that the notice issued under section 148 was invalid because the Income-tax Officer did not inform him about the grounds for believing that income had escaped assessment. The court examined whether there was a statutory obligation for the Income-tax Officer to provide such information before or at the time of issuing the notice.

The court found that neither section 147 nor section 148 required the Income-tax Officer to disclose the specific grounds or part of the income that had escaped assessment before issuing the notice. The notice must contain the requirements set out in section 139(2), but there is no legal obligation to provide detailed information to the assessee at that stage. The court acknowledged that while it is a desirable practice for the Income-tax Officer to inform the assessee, it is not a legal requirement. Therefore, the failure to provide such information did not invalidate the notice.

The court also noted that the Income-tax Officer had supplied the necessary information in the affidavit in reply, fulfilling any potential obligation to inform the petitioner post-issuance of the notice. The court dismissed the petition, affirming the validity of the notice issued under section 148.

Conclusion:

The petition was dismissed with costs. The court concluded that the intimation received by the Income-tax Officer constituted valid "information" under section 147(b), and there was no legal obligation for the Income-tax Officer to inform the assessee about the grounds for reassessment before or at the time of issuing the notice.