1982 (4) TMI 39 - HC - Income Tax

Summary

Issues:
1. Validity of the notice issued under section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the High Court to grant relief based on the cause of action.

Detailed Analysis:

1. Validity of the notice under section 148:
The petitioners, a charitable society and one of its members, challenged the notice issued under section 148 of the Income Tax Act, 1961, along with another notice calling for certain records. The society had been granted exemption under section 4(3) of the Indian Income Tax Act, 1922, and subsequently under the relevant provisions of the 1961 Act. The issue arose when the Income Tax Officer (ITO) sought to reopen the assessment for a previous year. The society contended that it was not obligated to file returns as its income was exempt. The court analyzed the statutory provisions and previous assessments. It concluded that there was no valid reason for the ITO to believe that income had escaped assessment. The court held that the notice under section 148 was not valid in law, and thus, quashed the notices.

2. Jurisdiction of the High Court:
The Department raised preliminary objections regarding the jurisdiction of the High Court to grant relief based on the cause of action. The objections were twofold: the delay in filing the petition and the location of the cause of action. The court considered these objections and ruled against them. It noted that part of the cause of action did arise within its jurisdiction, as the petitioner society was located within its territorial limits. Drawing a comparison with a previous case, the court found that effective relief could be granted within its jurisdiction. Therefore, the court rejected the objections raised by the Department and proceeded to analyze the merits of the case.

In conclusion, the High Court allowed the petition, quashing the notices issued under section 148 of the Income Tax Act, 1961. The court found that the society, being exempt from filing returns, had no valid reason for the Income Tax Officer to reopen the assessment. The court also affirmed its jurisdiction to provide relief in the matter. The parties were directed to bear their own costs, bringing the legal proceedings to a close.