1987 (4) TMI 20 - HC - Income Tax

Summary

Issues Involved:
The judgment involves the validity of the sanction for action u/s 147(a) of the Income-tax Act, the timeliness of initiating action u/s 147(a), and the legality of reassessment made u/s 144 of the Income-tax Act.

Validity of Sanction for Action u/s 147(a):
The first question raised was whether the sanction received by the Income-tax Officer for initiating action u/s 147(a) was valid. The counsel agreed that it was covered by a previous judgment and must be answered in the affirmative in favor of the Revenue.

Timeliness of Initiating Action u/s 147(a):
The second question regarding the timeliness of initiating action u/s 147(a) was not pressed by the counsel, and thus, an answer to it was not required.

Legality of Reassessment u/s 144:
The third and disputed question was whether the reassessment made u/s 144 was legal. The argument presented was that a best judgment assessment under section 144 should not apply if section 147 has been invoked. The contention was that the provisions of section 144 should not be applicable when section 147 is used for income escaping assessment.

Detailed Analysis:
The judgment clarified that under section 147 of the Income-tax Act, if income has escaped assessment, the Income-tax Officer may reassess it subject to certain provisions. It was highlighted that section 144 applies after a notice is served under section 148, which is a prerequisite for assessment or reassessment under section 147. The argument was made that a best judgment assessment under section 144 should not be made when section 147 is invoked and the assessee fails to respond to the notice under section 148.

Legal Reasoning:
The court analyzed the provisions of the Income-tax Act and emphasized that both sections 144 and 147 allow for assessments made to the best judgment of the taxing authority. It was noted that the material available should be used for assessment under both sections, and the assessee can challenge the assessment based on the material presented. The court rejected the argument that the provisions of section 144 should be excluded when section 147 is invoked.

Precedent and Conclusion:
A previous court decision was cited to support the argument that reassessment under section 147 is not the same as an assessment under sections 143 or 144. The judgment concluded that when an assessee does not respond to a notice under section 148, the taxing authority can assess based on best judgment under section 144. The first and third questions were answered in the affirmative and in favor of the Revenue, with the second question not being pressed. The assessee was directed to pay the costs of the reference to the Revenue.