1976 (9) TMI 29 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice u/s 148 of the Income-tax Act, 1961.
2. Full and true disclosure of material facts by the assessee.
3. Bona fide belief and application of mind by the Income-tax Officer.
4. Compliance with section 151(2) of the Income-tax Act, 1961.

Summary:

1. Validity of the notice u/s 148 of the Income-tax Act, 1961:
The appeal challenges the judgment setting aside a notice u/s 148 and quashing all proceedings initiated thereon. The original assessment for the year 1961-62 accepted the genuineness of hundi loans. The successor Income-tax Officer issued the notice u/s 148 on the ground that the assessee's income had escaped assessment within the meaning of section 147. The respondent disputed the validity of the notice, claiming it was not based on any reasonable belief and that there was full disclosure of all facts during the original assessment.

2. Full and true disclosure of material facts by the assessee:
The respondent asserted that all loans were disclosed during the original assessment, and the Income-tax Officer accepted them as genuine. The successor Income-tax Officer could not lawfully initiate reassessment proceedings based on a different opinion regarding these loans. The trial court accepted the respondent's case, holding that there was no omission or failure to disclose material facts, and the successor Income-tax Officer was merely changing his opinion.

3. Bona fide belief and application of mind by the Income-tax Officer:
The trial court also held that the reasons for issuing the notice were cyclostyled, indicating no bona fide belief. However, the appellate court disagreed, stating that the Income-tax Officer had reasons to believe that the loans were not genuine based on subsequent assessments. The belief was not merely a change of opinion but was based on actual facts found later. The appellate court found that the Income-tax Officer did apply his mind and formed a reasonable belief that the loans were not genuine.

4. Compliance with section 151(2) of the Income-tax Act, 1961:
The respondent contended that there was no bona fide satisfaction recorded by the Commissioner of Income-tax. The appellate court found that the Commissioner did apply his mind and recorded his satisfaction positively. There was no material to show that the Commissioner merely signed without application of mind.

Conclusion:
The appellate court set aside the trial court's judgment, holding that the notice u/s 148 was valid, the reassessment proceedings were not based on a mere change of opinion, and there was due compliance with section 151(2). The writ petition was dismissed, and the rule obtained by the respondent was discharged. The operation of the order was stayed for three weeks after Puja vacation.