1979 (9) TMI 40 - HC - Income Tax

Assessment Order, Assessment Proceedings, Failure To Disclose Material Facts, High Court, Notice For Reassessment, Original Assessment

Issues Involved:
1. Jurisdiction of the Income-tax Officer (ITO) to issue notices under Section 148.
2. Validity of reassessments made under Section 147.
3. Non-disclosure of material facts by the assessee.
4. Burden of proof regarding the existence of a trust deed.
5. Relevance of fresh material facts for reopening assessments.

Detailed Analysis:

1. Jurisdiction of the Income-tax Officer (ITO) to issue notices under Section 148:
The writ petitions challenged the notices issued by the ITO under Section 148, claiming they were without jurisdiction. The court held that the ITO's jurisdiction to issue such notices is contingent upon the prerequisite conditions of Section 147(a) being met. This includes having a reason to believe that income chargeable to tax has escaped assessment due to the assessee's omission or failure to disclose fully and truly all material facts necessary for the assessment. The court emphasized that the ITO must have reasonable grounds and that the belief must be based on information/material, not mere suspicion. The court concluded that the notices issued were without jurisdiction and quashed them.

2. Validity of reassessments made under Section 147:
The reassessments were based on the ITO's belief that income had escaped assessment due to non-disclosure by the assessee. The court examined the fresh material facts presented by the ITO and found them irrelevant to the issue at hand. The court noted that the reassessments were not sustainable in law as they were based on conjecture and suspicion rather than solid material. Consequently, the court held that the reassessments were without authority and quashed them.

3. Non-disclosure of material facts by the assessee:
The ITO argued that the assessee failed to disclose all primary facts necessary for the assessment. However, the court found that the original trust deed was produced during the assessment for 1947-48, and the ITO had accepted the trust as genuine. The court noted that the ITO had not brought any material to show that there was any omission or failure on the part of the assessee to disclose fully and truly all primary facts at the time of the original assessment. Therefore, the court held that there was no non-disclosure by the assessee.

4. Burden of proof regarding the existence of a trust deed:
The court addressed the argument that the onus of proving the existence of a genuine trust deed was on the assessee. The court found that this onus had been discharged at the time of the original assessment when the trust deed was produced. The court held that the ITO failed to prove that the trust was not genuine and that the onus was on the ITO to prove otherwise during the reassessment proceedings.

5. Relevance of fresh material facts for reopening assessments:
The ITO cited six fresh material facts as reasons to believe that income had escaped assessment. The court examined these facts and found them to be irrelevant to the issue of reopening the assessments. The court noted that the facts were based on presumptions, conjecture, and suspicion rather than solid material. The court concluded that these facts could not constitute "reason to believe" under Section 147(a) and were not sufficient to justify the reopening of assessments.

Conclusion:
The court allowed the writ petitions with costs, quashed the notices issued under Section 148, and the reassessment orders that followed. The court also answered the reference by holding that the Tribunal was not justified in law in upholding the reassessments made by the ITO and that the Appellate Assistant Commissioner was justified in canceling them for want of jurisdiction.

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