1990 (3) TMI 8 - HC - Income Tax

Summary

Issues:
1. Validity of notice issued under section 148 of the Income-tax Act, 1961 for the assessment year 1980-81 challenged by a limited company through a petition under article 226 of the Constitution of India.

Analysis:
The petitioner, a limited company, challenged the validity of a notice issued under section 148 of the Income-tax Act, 1961, for the assessment year 1980-81. The petitioner had originally filed its income tax return on June 26, 1980, declaring an income of Rs. 5,30,454, which was later assessed at Rs. 10,92,977 on September 1, 1982. The impugned notice was issued on March 30, 1985, requiring the petitioner to file its return for the same assessment year. Despite multiple requests for reasons behind the notice issuance, the Income-tax Officer did not provide the necessary information, leading to the filing of the present petition challenging the notice's validity. The petitioner relied on various legal precedents to argue that in the absence of an affidavit-in-reply and assessment records, the notice should be quashed.

The counsel for the petitioner argued that the absence of an affidavit-in-reply from the Department hindered the challenge to the formation of belief, a prerequisite for jurisdiction under section 148. Legal precedents were cited where the Supreme Court had quashed notices issued under similar circumstances. The Income-tax Department, through its counsel, explained the difficulties in producing assessment records promptly but presented the reasons for reopening the assessment in this case, particularly related to depreciation. Despite objections from the petitioner's counsel, the court decided to examine the assessment records to determine the validity of the notice issuance.

Upon reviewing the assessment records, it was noted that the Income-tax Officer believed the petitioner's income had escaped assessment due to alleged discrepancies in depreciation claims. However, the court found that the objections raised by the Internal Audit Party did not provide a solid basis for reopening the assessment. The court highlighted the lack of clarity in the objections related to depreciation and concluded that the conditions for reopening the assessment under section 147(b) were not met in this case. As a result, the court quashed the notice issued under section 148 for the assessment year 1980-81.

In conclusion, the court made the rule absolute in favor of the petitioner, quashing the notice under section 148 without imposing any costs.