1991 (8) TMI 37 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notices issued under Section 148 of the Income-tax Act, 1961.
2. Whether income chargeable to tax had escaped assessment.
3. Whether the petitioner failed to disclose fully and truly all material facts necessary for assessment.
4. Applicability of Section 147(a) and Section 147(b) of the Income-tax Act.
5. Deduction of market cess and sales tax under Section 43B of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Validity of Notices Issued Under Section 148 of the Income-tax Act:
The primary question was whether the notices issued under Section 148 for reopening assessments for the years 1980-81 to 1985-86 were valid. The petitioner argued that the notices were without jurisdiction, while the respondent contended that the notices were valid as the income chargeable to tax had escaped assessment due to the petitioner's failure to disclose fully and truly all material facts.

2. Whether Income Chargeable to Tax Had Escaped Assessment:
The respondent claimed that during the assessment proceedings for 1986-87, it was discovered that the petitioner collected amounts under the head "sub sadaran" which were not disclosed as trading receipts, leading to income escaping assessment. The petitioner countered this by stating that the amounts collected were for charity and did not constitute trading receipts.

3. Whether the Petitioner Failed to Disclose Fully and Truly All Material Facts Necessary for Assessment:
The court examined whether the petitioner had disclosed all primary facts necessary for assessment. It was found that the petitioner had mentioned "sub sadaran" in the balance-sheet and filed profit and loss accounts along with the returns. The court concluded that there was full and true disclosure of primary facts, and thus, the conditions precedent for reopening the assessments under Section 147(a) were not satisfied.

4. Applicability of Section 147(a) and Section 147(b) of the Income-tax Act:
The court observed that the reasons given by the respondent for reopening the assessments were under Section 147(a). It was held that the notices could not be sustained under Section 147(b) as the primary facts were disclosed, and there was no failure or omission on the part of the petitioner to disclose necessary material facts.

5. Deduction of Market Cess and Sales Tax Under Section 43B of the Income-tax Act:
For the assessment years 1984-85 and 1985-86, additional reasons for reopening the assessments were the deductions claimed for market cess and sales tax. The court found that the market cess was not covered by Section 43B at the relevant time, making this reason untenable. However, the sales tax deduction was covered by Section 43B, and since the petitioner had not paid the amount in the relevant year, the notice for the year 1984-85 was justified.

Conclusion:
The court quashed the notices issued under Section 148 for the assessment years 1980-81 to 1983-84 due to the lack of jurisdiction. However, the notice for the year 1984-85 was upheld due to the valid reason of unpaid sales tax under Section 43B. The writ petitions were allowed for the years 1980-81 to 1983-84 and dismissed for the year 1984-85.