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Issues Involved:
Challenging the validity of a notice u/s 148 of the Income-tax Act, 1961 for assessing escapement of income for the assessment year 1984-85 without obtaining the sanction of the Chief Commissioner or Commissioner of Income-tax. Judgment Details: Validity of Notice u/s 148: The notice was issued beyond four years from the end of the assessment year without the necessary sanction. Section 151 of the Income-tax Act specifies that for notices issued after four years, the Chief Commissioner or Commissioner's satisfaction is required. The law mandates that the sanction of the Chief Commissioner or Commissioner is essential before issuance of a notice u/s 148 after the specified period. The notice in question lacked this required sanction, rendering it invalid in law. Reasons for Reopening Assessment: The recorded reasons for reopening the assessment alleged that the assessee failed to disclose fully and truly all material facts necessary for assessment. However, it was argued that the assessee had disclosed all relevant facts regarding depreciation allowance, and the alleged failure was based on a misunderstanding of the law rather than a deliberate omission. Merely allowing excessive depreciation due to a misinterpretation of the law does not constitute a failure to disclose material facts. The court held that there was no suppression of material facts by the assessee, as the law regarding depreciation should have been known to both the assessee and the Income-tax Department. Conclusion: The writ petition succeeded as the notice u/s 148 was deemed invalid for lack of necessary sanction. The court ordered in favor of the petitioner, staying the operation of the order for three weeks. The Department was prohibited from taking further steps based on the notice issued u/s 148 until further court orders. No costs were awarded in the matter.
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