1977 (5) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Officer to reopen the assessment u/s 148 of the Income-tax Act, 1961.
2. Validity of the reasons recorded by the Income-tax Officer for reopening the assessment.
3. Application of mind by the Income-tax Officer and the Additional Commissioner of Income-tax.
4. Validity of the notice issued by the Additional Commissioner of Income-tax.

Summary:

1. Jurisdiction of the Income-tax Officer to reopen the assessment u/s 148 of the Income-tax Act, 1961:
The principal question was whether the Income-tax Officer had jurisdiction to reopen the assessment for the assessment year 1962-63 by serving a notice u/s 148. The respondent challenged the jurisdiction of the Income-tax Officer to issue the notice and reopen the assessment for the said year. The court held that the Income-tax Officer had jurisdiction to reopen the assessment based on the materials available from the assessment order for the year 1964-65, which indicated that the hundi loans were not genuine.

2. Validity of the reasons recorded by the Income-tax Officer for reopening the assessment:
The reasons recorded by the Income-tax Officer included that the assessee obtained hundi loans from various parties which were found to be not genuine. The court observed that the reasons recorded were based on the findings from the assessment year 1964-65, where the hundi loans were scrutinized and found to be bogus. The court held that there was a direct nexus or live-link between the assessment order for the year 1964-65 and the formation of the belief by the Income-tax Officer that there had been escapement of income for the year 1962-63.

3. Application of mind by the Income-tax Officer and the Additional Commissioner of Income-tax:
The respondent contended that the reasons recorded by the Income-tax Officer were cyclostyled, indicating non-application of mind. The court held that the determination of whether the Income-tax Officer applied his mind depends on the scrutiny of the records and the existence of materials forming the basis of the reasons. The court found that the Income-tax Officer had relevant materials justifying the issuance of the notice u/s 148. Additionally, the court rejected the contention that the Additional Commissioner did not apply his mind when granting permission for the notice, stating that it would be mere speculation to hold so.

4. Validity of the notice issued by the Additional Commissioner of Income-tax:
The respondent argued that the notice was invalid as it was granted by the Additional Commissioner of Income-tax instead of the Commissioner. The court dismissed this argument, referring to section 2(16) of the Income-tax Act, 1961, which defines "Commissioner" to include an Additional Commissioner of Income-tax.

Conclusion:
The court set aside the judgment of the learned trial judge, discharged the rule, and allowed the appeal. The operation of the judgment was stayed for six weeks to enable the respondent to prefer an appeal to the Supreme Court.