1981 (2) TMI 62 - HC - Income Tax

Summary

Issues:
- Quashing of notices issued under s. 147/148 of the I.T. Act, 1961 for reassessment of income for specific assessment years.
- Failure to disclose fully and truly all material facts necessary for assessment.
- Legality of notices issued to individuals instead of an association of persons.
- Existence of conditions precedent for the exercise of jurisdiction under s. 147/148 of the I.T. Act, 1961.

Analysis:
The petition sought to quash notices under s. 147/148 of the I.T. Act, 1961 for reassessment of income for the years 1955-56, 1956-57, and 1957-58. The case involved ancestral agricultural land sales and payments received by the petitioners. The primary contention was the failure to disclose all material facts necessary for assessment. The duty of disclosing relevant facts lies on the assessee, as established by legal precedents. The assessing authority must draw inferences from disclosed primary facts to determine the correct tax due. In this case, the assessee had disclosed ownership of lands and payments received, fulfilling the duty of disclosure. The assessing authority's failure to draw correct inferences does not shift responsibility to the assessee.

The legality of the notices issued to individuals, not an association of persons, was also challenged. The Supreme Court had previously observed that the notices were not aimed at assessing an association of persons. The notices being addressed to individuals indicated a deviation from assessing an association, even if one existed. This deviation could amount to a change of opinion, rendering the reassessment impermissible. Each assessment year must be treated as a separate proceeding, as established in previous judgments.

The judgment emphasized the need for conditions precedent to the exercise of jurisdiction under s. 147/148 of the I.T. Act, 1961. The assessing officer must have reasons to believe in the case of reopening and the omission of full disclosure by the assessee. While the formation of the opinion was not challenged, the focus was on whether all material facts were disclosed. The writ petition succeeded in quashing the notices and subsequent proceedings, as the assessee had fulfilled the duty of making a true disclosure. The judgment aligned with previous decisions, emphasizing the importance of disclosing primary facts for correct assessments.