1984 (8) TMI 52 - HC - Income Tax

Summary

Issues:
1. Validity of the notice dated March 18, 1980, issued under the E.D. Act, 1953.
2. Legality of reopening the assessment in question.
3. Grounds for issuing the notice under section 59 of the Act.
4. Lack of information or material supporting the notice.
5. Consideration of change of opinion or audit objection as grounds for the notice.
6. Application of legal principles from relevant case laws to the present case.
7. Jurisdiction of the Income-tax Officer to proceed under section 34(1)(a).

Analysis:

The petition under art. 226 of the Constitution challenges the legality and validity of the notice dated March 18, 1980, issued under the E.D. Act, 1953. The deceased, a partner in two firms, had his estate assessed for estate duty. The assessment included the goodwill of the partnership firms and the deceased's share in it, along with an annuity deposit. The petitioner contested the assessment in appeal, resulting in modifications. Subsequently, a notice was issued under section 59 of the Act, alleging that property chargeable to estate duty had escaped assessment. The petitioner sought reasons for the notice, but no response was provided, leading to the petition.

The High Court found the impugned notice unsustainable and lacking a valid basis. The respondents failed to provide any information or material supporting the notice. The court considered two possibilities for issuing the notice: change of opinion or audit objection. It was established that neither of these grounds could justify the notice under section 59 of the Act. Citing a Supreme Court ruling, the court emphasized that mere change of opinion or audit objection does not validate such notices.

Referring to another Supreme Court decision, the court highlighted the importance of recording reasons for forming a belief in such cases. The absence of supporting records or reasons led to an adverse inference against the department. Consequently, the court set aside and quashed the notice dated March 18, 1980, restraining the respondents from taking further steps based on it. The petition was allowed, and no costs were awarded in the circumstances.