2006 (4) TMI 56 - HC - Income Tax

Notice u/s 148 on the basis of not appended to return is upheld. Proper approval from DCIT and CIT notice served upon family member of the assessee and well attended from that member is proper

Issues Involved:
1. Validity of the Assessing Officer's belief that income had escaped assessment.
2. Validity of proceedings without approval from the Deputy Commissioner of Income-tax.
3. Validity of service of notice on an adult family member.
4. Validity of proceedings given less than 30 days to furnish the return of income.

Issue-wise Detailed Analysis:

1. Validity of the Assessing Officer's Belief:
The Tribunal was questioned whether the Assessing Officer (AO) had misread the explanatory note leading to a belief that income had escaped assessment. The court found that the AO had a valid reason to believe income had escaped assessment based on the information provided by the assessee. The explanatory note indicated continuous investment in the property until 1983-84, justifying the AO's belief. The court emphasized that the adequacy or sufficiency of the material is not a ground for questioning the AO's belief. The belief about the escapement of income was based on the assessee's own disclosure, and the proceedings were initiated within the permissible period. Thus, the court answered in favor of the Revenue.

2. Validity of Proceedings without Deputy Commissioner's Approval:
The issue was whether the proceedings were valid despite the AO not obtaining the Deputy Commissioner's approval. The court clarified that as per Section 151, the AO needed the satisfaction of the Deputy Commissioner or Commissioner before initiating proceedings after four years from the end of the relevant assessment year. The Tribunal found that the necessary approvals were obtained from both the Deputy Commissioner and the Commissioner, satisfying the requirements of Section 151. Therefore, the court upheld the validity of the proceedings, answering in favor of the Revenue.

3. Validity of Service of Notice on an Adult Family Member:
The court examined whether the service of notice on the assessee's adult son was sufficient. The Tribunal referred to the Code of Civil Procedure, which allows service on an adult family member residing with the individual. Since the assessee participated in the proceedings after the notice was served on his son, the court deemed the service proper. The Supreme Court's decision in R. K. Upadhyaya v. Shanabhai P. Patel clarified that service of notice is a procedural requirement, not a condition precedent for jurisdiction. The court concluded that the service was valid and answered in favor of the Revenue.

4. Validity of Proceedings Given Less than 30 Days to Furnish Return:
The issue was whether the proceedings were invalid because the notice required the assessee to file a return "within 30 days" instead of "not less than 30 days." The court noted that Section 148 was retrospectively amended by the Finance Act, 1996, removing the requirement of a 30-day notice period. As the amendment was effective from April 1, 1989, the notice issued in January 1993 was in compliance with the amended law. The court emphasized that retrospective amendments must be applied to ongoing proceedings. Consequently, the court answered in favor of the Revenue.

Conclusion:
All four questions were answered against the assessee and in favor of the Revenue. The court upheld the validity of the reassessment proceedings initiated by the AO, finding no procedural or jurisdictional errors.

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