1977 (10) TMI 4 - HC - Income Tax

Summary

Issues: Validity of notice under s. 148 of the I.T. Act, 1961; Formation of requisite belief for action under s. 147(a) of the Act; Disclosure of material facts by the assessee; Sanction by the Commissioner for reopening of assessment.

Validity of Notice under s. 148 of the I.T. Act, 1961:
The appeal challenged a notice dated 15th March, 1969, under s. 148 of the I.T. Act, 1961, based on discrepancies in the signatory designation. The trial judge upheld the validity of the notice, relying on recorded reasons and a letter dated 15th February, 1969. The appellant contended that the notice was defective and lacked material for the requisite belief under s. 147(a). The appellant argued that the letter was not relied upon by the assessing officer and was not disclosed to the CIT, violating principles of natural justice. However, the Court found that the notice was valid, supported by the recorded reasons and the letter.

Formation of Requisite Belief for Action under s. 147(a) of the Act:
The main issue raised was the sufficiency of material for the formation of the requisite belief under s. 147(a). The appellant argued that the assessing officer did not have adequate grounds for reopening the assessment. The appellant claimed that the letter dated 15th February, 1969, was not considered during the original assessment and was disclosed late, depriving the appellant of a chance to rebut. However, the Court found that the assessing officer had valid reasons, supported by the letter dated 26th February, 1969, showing discrepancies in jute purchases, justifying the reopening of the assessment under s. 147(a).

Disclosure of Material Facts by the Assessee:
The appellant contended that there was no failure to disclose income fully or truly, as the alleged discrepancies were known to the assessing officer during the original assessment. The appellant argued that no new material was presented for reopening the assessment. However, the Court held that the duty of disclosure by the assessee is not discharged merely by producing books of account, emphasizing the obligation to reveal all relevant facts necessary for assessment. The Court found that the appellant did not make a full and true disclosure, justifying the reassessment under s. 147(a).

Sanction by the Commissioner for Reopening of Assessment:
The appellant challenged the sanction by the Commissioner for reopening the assessment, alleging improper consideration of the material. The Court, however, found that the Commissioner's sanction was valid, based on the recorded reasons and the letter dated 26th February, 1969. The Court agreed with the trial judge's findings, concluding that the conditions for action under s. 147(a) were satisfied, and upheld the validity of the notice and the reopening of the assessment. The appeal was dismissed, with no order as to costs.

Conclusion:
The Court affirmed the validity of the notice under s. 148 of the I.T. Act, 1961, and the formation of the requisite belief for action under s. 147(a) based on the material provided. The judgment emphasized the duty of the assessee to disclose all relevant facts for assessment and upheld the Commissioner's sanction for reopening the assessment. The Court dismissed the appeal, agreeing with the trial judge's decision and reasoning.