1985 (1) TMI 27 - HC - Income Tax

Summary

Issues involved:
The issues involved in the judgment are the validity of a notice issued by the Income Tax Officer (ITO) u/s 148 read with s. 147(b) of the Income Tax Act, 1961, for reopening the assessment for the assessment year 1981-82, and the challenge to the notice by the petitioner-assessee on the grounds that the audit information did not justify reassessment and that all necessary facts were disclosed during the original assessment.

Validity of Notice for Reassessment:
The petitioner purchased a building, made alterations and additions, and later sold it, showing long-term capital gain in the assessment for the year 1981-82. The ITO accepted the computation of long-term capital gain and completed the assessment. However, a notice for reassessment was issued based on an audit note suggesting that the cost of additional construction was overstated. The petitioner contended that the audit information did not justify the reassessment. The High Court held that audit information does not constitute information in law for reassessment.

Disclosure of Necessary Facts:
The respondent officer argued that the notice for reassessment was required because the petitioner failed to disclose all necessary details regarding the development of the property during the original assessment. However, the High Court found that all relevant details were indeed disclosed during the assessment process. The petitioner had submitted a statement of computation, an affidavit, and other supporting documents regarding the expenses for additions and alterations. The assessment order also noted the submission of necessary details and verification from the bank's pass-book. Therefore, the High Court concluded that there was no failure on the part of the assessee in disclosing the true and complete material.

Decision:
The High Court allowed the petition on both grounds. It held that audit information does not justify reassessment and that all necessary facts were disclosed during the original assessment. The impugned notice was quashed and set aside, and the ITO was restrained from further proceedings based on the notice. The High Court made the rule absolute with no order as to costs.