1979 (9) TMI 207 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the IT Act, 1961.
2. Time limit for issuing the notice under Section 148.
3. Jurisdiction of the ITO to issue the notice.
4. Approval from the Commissioner under Section 151(2).
5. Concurrent jurisdiction under Section 125A.
6. Ownership of the duplicate books of account.
7. Application of mind by the CBDT in granting approval.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The writ petition challenges the notice dated 9th March 1973, issued by the ITO, District VI(13), New Delhi, on the grounds that income chargeable to tax for the assessment year 1961-62 had escaped assessment within the meaning of Section 147(a) of the IT Act, 1961. The ITO had issued a notice on 25th March 1970 under Section 148 of the Act on the grounds that certain income for the assessment year 1961-62 had escaped assessment. This notice was later found to be invalid due to the lack of prior permission from the Commissioner as required by Section 151(2) of the Act. Consequently, the proceedings initiated under Section 147(a) were quashed. However, a new notice was issued on 13th March 1978, which specifically mentioned that it had been issued after the necessary satisfaction of the CBDT.

2. Time Limit for Issuing the Notice Under Section 148:
Section 149 of the Act provides a time limit for issuing notices under Section 148. For cases falling under Section 147(a), no notice shall be issued if eight years have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to Rs. 50,000 or more, in which case a notice can be issued within 16 years. The relevant assessment year being 1961-62, the 16-year period expired on 31st March 1978. The notice given on 9th March 1978 was therefore within time. The argument that the income assessed on 19th March 1974 was Rs. 45,000 and hence the 8-year limit applied was rejected because the order of 19th March 1974 was set aside, and a new assessment on 23rd October 1975 found the undisclosed income to be more than Rs. 50,000.

3. Jurisdiction of the ITO to Issue the Notice:
The ITO issued the impugned notice on 13th March 1978 based on the assessment order of 23rd October 1975, which showed that the escaped assessable income was more than Rs. 50,000. The argument that the ITO had no jurisdiction to reassess the income was rejected. The ITO had the jurisdiction to issue the notice under Section 148, as the previous assessment order had been set aside, and a new assessment had been made, which showed the concealed income to be more than Rs. 50,000.

4. Approval from the Commissioner Under Section 151(2):
The AAC had earlier quashed the notice issued on 25th March 1970 because it was issued without the prior permission of the Commissioner as required by Section 151(2). However, the new notice issued on 13th March 1978 specifically mentioned that it had been issued after the necessary satisfaction of the CBDT. The affidavit filed by the IAC and the original file showed that the reasons mentioned by the ITO were duly scrutinized by the CBDT, and the approval was given after applying full mind.

5. Concurrent Jurisdiction Under Section 125A:
Section 125A empowers the Commissioner to direct that the powers or functions conferred on or assigned to the ITO under the Act be exercised or performed concurrently by the IAC. The ITO, District VI(13), had concurrent jurisdiction with the IAC, Range 2(c). The argument that the ITO had no jurisdiction to issue the notice was rejected, as there was no direction from the IAC restricting the ITO's jurisdiction to issue the notice under Section 148.

6. Ownership of the Duplicate Books of Account:
The assessment proceeded on the basis that the duplicate books of account belonged to the assessee. The ITO's order of 23rd October 1975 and the Tribunal's findings confirmed that the duplicate books belonged to the assessee-firm. The contention that the duplicate books were not of the assessee was rejected, as the ownership of the books had already been concluded by the IT authorities.

7. Application of Mind by the CBDT in Granting Approval:
The affidavit by the IAC and the original file showed that the reasons mentioned by the ITO were duly scrutinized by the CBDT, and the approval was given after applying full mind. The reasons recorded by the ITO on 1st August 1977 for seeking permission to issue the notice clearly mentioned that the assessee was carrying on money-lending business, and interest income was recorded in the duplicate books of account, which were not produced before the Department. The belief of the ITO on the material before him was found to be rational and not illusory or dishonest.

Conclusion:
The petition challenging the notice issued under Section 148 was dismissed with costs. The Court found no merit in the petition, as all the conditions precedent for the issue of notice under Section 148 were complied with, and the ITO had the jurisdiction to issue the notice. The approval from the CBDT was given after applying full mind, and the ownership of the duplicate books of account was conclusively established.