1993 (9) TMI 67 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the notice issued under Section 148(1) of the Income-tax Act.
2. Method of accounting adopted by the petitioner.
3. Availability of alternative remedy.
4. Disclosure of material facts by the petitioner.
5. Applicability of the Supreme Court decision in State Bank of Travancore v. CIT.
6. Real income concept and its assessment.

Issue-wise Detailed Analysis:

1. Jurisdiction of the notice issued under Section 148(1) of the Income-tax Act:
The petitioner challenged the jurisdiction of the notice issued under Section 148(1) of the Income-tax Act for reassessment on the grounds that the notice was without jurisdiction. The court examined whether the Income-tax Officer had any material to believe that income chargeable to tax had escaped assessment. The court concluded that there was some material on the basis of which the notice could be issued, and thus, the notice was not without jurisdiction.

2. Method of accounting adopted by the petitioner:
The petitioner argued that it followed a hybrid system of accounting, crediting interest on bad debts only upon actual receipt. The Revenue contended that the petitioner followed the mercantile system of accounting and failed to disclose interest on accrual basis. The court noted that the petitioner had indicated in its returns that it followed the mercantile system, and thus, it could not be assumed that the petitioner disclosed all material facts truly. The court left it to the authorities to determine whether the petitioner followed a hybrid system.

3. Availability of alternative remedy:
The Revenue raised a preliminary objection that the writ petition should be dismissed due to the availability of an alternative remedy through appeals. The court agreed, citing previous decisions, and emphasized that disputed questions of fact and jurisdiction should be addressed through the statutory remedy provided under the Income-tax Act.

4. Disclosure of material facts by the petitioner:
The court examined whether the petitioner had disclosed all material facts necessary for the assessment. It was found that the petitioner had not disclosed the change in the method of accounting or that it was following a hybrid system. The court concluded that the petitioner had not disclosed all material facts truly, and thus, the reassessment notice was valid.

5. Applicability of the Supreme Court decision in State Bank of Travancore v. CIT:
The petitioner relied on the Supreme Court decision in State Bank of Travancore v. CIT to argue that the reopening of the assessment was without jurisdiction. The court distinguished the facts of the present case from the cited decision, noting that the petitioner had not disclosed the change in the method of accounting. The court held that the decision in State Bank of Travancore was not applicable to the present case.

6. Real income concept and its assessment:
The petitioner argued that only real income, which had actually accrued, should be subject to tax. The court acknowledged this principle but emphasized that the petitioner had not disclosed the change in the method of accounting. The court concluded that the authorities should determine whether the income had actually accrued based on the facts presented.

Conclusion:
The court dismissed the writ petitions, holding that the reassessment notices issued under Section 148(1) were valid, the petitioner had not disclosed all material facts truly, and the petitioner should pursue the alternative remedy available under the Income-tax Act.