2010 (4) TMI 855 - HC - Income Tax

Re-assessment - notice u/s 148 - held that - this court can only examine whether there was material to issue notice under section 148 of the Act. - the petitioner has admitted that it had maintained the books of account on the mercantile basis. It is not in dispute that the rent for the months of February and March, 1997, which had been accrued have not been disclosed in the assessment year 1997-98 and for the months of February and March, 1999, which had been accrued, have not been disclosed in the assessment year 1999-2000. - there was material to form belief that there was escaped assessment for both the assessment years and the notices issued under section 148 of the Act have rightly been issued. - Decided against the assessee.

Summary

Issues:
Challenging notices under section 148 of the Income-tax Act for assessment years 1997-98 and 1999-2000.

Analysis:
The petitioner, running a cold storage, challenged notices issued under section 148 of the Income-tax Act for the assessment years 1997-98 and 1999-2000. The petitioner maintained accounts on the mercantile basis and filed income-tax returns for the relevant years. Notices were issued after recording reasons, citing non-disclosure of rents accrued in specific months for each assessment year. The petitioner argued that they followed a specific method of accounting in accordance with a State Government notification for cold storage, and similar disputes had been resolved in their favor previously. The petitioner claimed that the rent had not been disclosed due to not maintaining a mercantile system of accountancy, a claim accepted in a previous appeal for a different assessment year.

Analysis Continues:
The standing counsel argued that as per the petitioner's admission of adopting the mercantile system of accountancy, rents should have been disclosed on an accrual basis for the specific months in question. The standing counsel contended that since the rents had accrued but not been disclosed, there were escaped assessments, justifying the initiation of proceedings. The standing counsel emphasized that the outcome of the appeal for a different assessment year was irrelevant to the current case, as the department had not accepted the appellate order.

Analysis Continues:
Upon hearing both parties, the court examined the reasons recorded for the initiation of proceedings for the assessment years 1997-98 and 1999-2000. The court noted the petitioner's admission of maintaining accounts on a mercantile basis and the non-disclosure of accrued rents for specific months in the relevant assessment years. Consequently, the court found sufficient material to support the belief of escaped assessments for both years, validating the issuance of notices under section 148 of the Act.

Analysis Continues:
Regarding the petitioner's claim of not following the mercantile system of accountancy for rents, the court stated that such arguments should be raised before the assessing authority. Ultimately, the court found the writ petition lacking merit and dismissed it accordingly.