1977 (7) TMI 40 - HC - Income Tax

Summary

Issues:
1. Validity of notice under section 148 of the Income-tax Act, 1961.
2. Applicability of section 153(2)(b)(ii) of the Act.
3. Timeliness of the notice served under section 139 of the Act.

Analysis:

The judgment concerns an appeal against a previous ruling by T. K. Basu J., where a writ in the nature of certiorari was issued to quash a notice dated 25th January, 1967, issued under section 148 of the Income-tax Act, 1961, along with an order of assessment. The respondent, an assessee, was served with the notice under section 148 alleging that income for the assessment year 1962-63 had escaped assessment. The respondent denied the allegations and filed a return based on the original one. The appeal argued that power under section 147(1)(a) could be exercised based on material information leading to the belief of escaped assessment. However, it was found that the Income-tax Officer issued the notice mechanically without applying his mind to the facts of the case, thus falling under section 147(1)(b) instead. This led to the application of section 153(2)(b)(ii) which sets a time limit for reassessment after the service of the notice under section 148.

The judgment further delves into the timeliness of a subsequent notice served under section 139 of the Act on February 1, 1971, requiring the respondent to produce documents. It was highlighted that no assessment or reassessment could be made under section 147 after the expiry of one year from the date of service of the notice under section 148. As the subsequent notice was served about 4 years after the initial notice under section 148, the appellants could not proceed with the reassessment as attempted. Consequently, the appeal was dismissed with no order as to costs, and the cases cited by the appellants were not deemed necessary to be addressed.

In a separate opinion, R. N. Pyne J. agreed with the conclusions reached in the judgment. A stay of operation of the order was granted for eight weeks, with the interim order continuing for another eight weeks.