1994 (6) TMI 13 - HC - Income Tax

Affidavit By ITO, Assessment Notice, Failure To Disclose Material Facts, Reassessment Notice, Writ Petition

Summary

Issues:
1. Challenge to notice under section 148 of the Income-tax Act, 1961 as illegal and without jurisdiction.

Detailed Analysis:
The petitioner challenged a notice dated March 6, 1985, issued by the second Income-tax Officer, C-V Ward, Bombay, under section 148 of the Income-tax Act, 1961, as illegal and without jurisdiction. The petitioner contended that all material particulars of income were disclosed along with the returns and in compliance with a previous notice under section 143(2) of the Act. The petitioner argued that there was no failure to disclose any material fact relevant for assessment, and the Income-tax Officer did not have any information to justify reopening the assessments for the years 1977-78 and 1978-79 under section 147(a) of the Act.

The Court noted that the respondents did not file any affidavit or produce relevant records to counter the petitioner's averments. The Court emphasized that for the Income-tax Officer to exercise jurisdiction under section 147(a) of the Act, two conditions must be fulfilled: (1) underassessment of income, property, or gains, and (2) such underassessment was due to the assessee's failure to disclose fully and truly all material facts necessary for assessment. The Court highlighted that if these facts are challenged, it is the Income-tax Officer's responsibility to provide evidence to satisfy the court. In the absence of such evidence, the court must accept the petitioner's contentions.

The Court referenced the Supreme Court's decision in Madhya Pradesh Industries Ltd. v. ITO [1965] 57 ITR 637, stating that without an affidavit by the Income-tax Officer, the determination of whether the disclosure by the assessee was full and true cannot be made, and objections to the notice being issued with a collateral object cannot be dismissed without an inquiry. In this case, as the Income-tax Officer did not file an affidavit or produce records to demonstrate the existence of conditions precedent for exercising power under section 147(a), the Court concluded that the impugned notices could not be sustained and proceeded to quash them.

Ultimately, the Court allowed the writ petition, making the rule absolute in favor of the petitioner and quashing the impugned notices. No costs were awarded in the judgment.