1984 (6) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the notice issued u/s 148 of the I.T. Act, 1961.
2. Jurisdiction of the ITO to reopen the assessment for the year 1972-73.
3. Compliance with the conditions u/s 147(a) for reopening assessment.

Summary:

1. Legality of the notice issued u/s 148 of the I.T. Act, 1961:
The petitioner, an income-tax assessee, challenged the notice dated March 18, 1981, issued u/s 148 of the I.T. Act, 1961, for reopening his assessment for the assessment year 1972-73. The petitioner argued that the notice was illegal and without jurisdiction as it did not state any reasons for reopening the assessment. The ITO did not supply the reasons despite repeated requests from the petitioner.

2. Jurisdiction of the ITO to reopen the assessment for the year 1972-73:
The court examined whether the ITO had legal justification to issue the notice of reassessment u/s 148. It was noted that the ITO must have reason to believe that income chargeable to tax had escaped assessment due to the assessee's omission or failure to disclose fully and truly all material facts necessary for the assessment. The court emphasized that both conditions must co-exist to confer jurisdiction on the ITO. The ITO's belief must be based on reasonable grounds and not mere suspicion or opinion.

3. Compliance with the conditions u/s 147(a) for reopening assessment:
The court highlighted that the duty of the assessee is to make a true and full disclosure of primary facts at the time of the original assessment. The ITO must draw the correct inference from these facts. A mere change of opinion by the ITO does not justify reopening the assessment. The court found that the ITO's sole basis for issuing the notice was the report of the Departmental valuer, which was obtained 3 1/2 years after the completion of the renovation work and was merely an estimate. There was no evidence to show that there had been a failure to disclose material facts necessary for the assessment.

Conclusion:
The court concluded that the notice issued by the ITO u/s 148 was illegal and without jurisdiction as the necessary preconditions to confer jurisdiction were absent. The petition was allowed, and the impugned notice dated March 18, 1981, was quashed. The respondents were restrained from taking any proceedings under the said notice. The parties were directed to bear their respective costs.