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Issues:
1. Validity of notice issued by the ITO under s. 148 read with s. 147(a) of the Income Tax Act, 1961 for reopening income tax assessment. 2. Jurisdiction of the ITO to issue notice under s. 147(a) of the Act based on reasons for under-assessment. 3. Requirement of disclosure of material facts by the assessee for assessment under s. 147(a) of the Act. 4. Consideration of valuation method in assessment and relevance of wealth-tax return disclosure. 5. Determination of jurisdiction to reopen assessment under s. 148 and s. 147(a) of the Act. Analysis: The High Court of Gujarat considered a petition challenging a notice issued by the Income Tax Officer (ITO) under s. 148 read with s. 147(a) of the Income Tax Act, 1961, to reopen the income tax assessment for the assessment year 1972-73. The petitioner, an assessee holding shares in private limited companies, had disclosed capital loss in the return based on the market value of shares as on January 1, 1954, determined by an approved valuer. The ITO accepted this valuation and completed the assessment in 1975. However, in 1979, the ITO issued a notice alleging under-assessment due to the petitioner's failure to disclose the market value of shares in a wealth-tax return for 1957-58, which was lower than the value used for income tax assessment. The court examined the jurisdiction of the ITO to reopen the assessment under s. 147(a) based on reasons for under-assessment. The court referred to the Supreme Court decision in S. Narayanappa v. CIT, which outlined conditions for the ITO to issue a notice under s. 34 of the 1922 Act, emphasizing the need for belief in under-assessment due to non-disclosure of material facts by the assessee. These conditions were held to be equally applicable to cases under s. 147(a) of the current Act. The court reiterated that the sufficiency of reasons for the ITO's belief is not justiciable, but the existence of such belief can be challenged by the assessee. The court emphasized that the ITO must have reason to believe that income has escaped assessment due to the assessee's failure to disclose material facts. Regarding the valuation method adopted by the approved valuer and the alleged suppression of wealth-tax return details, the court held that the value shown in the wealth-tax return for 1957-58 was not relevant to the computation of capital loss for the income tax assessment in 1972-73. The court noted that the assessee had disclosed all material facts necessary for assessment, including the approved valuer's report, which used a recognized valuation method. The court concluded that the ITO lacked jurisdiction to reopen the assessment as the conditions precedent under s. 148 and s. 147(a) were not satisfied, quashing the notice issued by the ITO. In conclusion, the court allowed the petition, setting aside the notice dated March 12, 1979, issued by the ITO under s. 148 read with s. 147(a) of the Act. The court held that the ITO had no jurisdiction to reopen the assessment, ruling in favor of the petitioner.
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