1965 (12) TMI 2 - HC - Income Tax

Petition for quashing and setting aside a notice under section 148 read with section 147(b) - validity

Issues Involved:
1. Validity of the notice under section 148 read with section 147(b) of the Income-tax Act, 1961.
2. Whether the Income-tax Officer had information justifying the reopening of the assessment for the year 1960-61.
3. Whether the action of the Income-tax Officer amounted to a mere change of opinion.
4. Relevance of the report dated July 8, 1964, to the assessment year 1960-61.
5. Allegation of mala fide intention behind issuing the notice.

Issue-wise Detailed Analysis:

1. Validity of the Notice under Section 148 read with Section 147(b):
The petitioner sought to quash the notice dated July 18, 1964, issued under section 148 read with section 147(b) of the Income-tax Act, 1961, for the assessment year 1960-61. The petitioner argued that the notice was invalid as there was no new information justifying the reopening of the assessment. The court held that the notice was valid as the Income-tax Officer had received new information in the form of a report dated July 8, 1964, which constituted a basis for a reasonable belief that income had escaped assessment.

2. Information Justifying Reopening of the Assessment:
The Income-tax Officer received new information in the form of a report from his ward inspector dated July 8, 1964. This report provided detailed insights into the working of the petitioner-company, including the allocation of expenses related to exempted and non-exempted income. The court found that these details were not available during the original assessment for the year 1960-61 and that the report constituted new information justifying the reopening of the assessment under section 147(b).

3. Mere Change of Opinion:
The petitioner argued that the action of the Income-tax Officer amounted to a mere change of opinion, which is not a valid ground for reopening an assessment. The court rejected this contention, stating that the details in the report dated July 8, 1964, were new information that was not available during the original assessment. Therefore, the reopening of the assessment was not due to a mere change of opinion but based on new information.

4. Relevance of the Report to the Assessment Year 1960-61:
The petitioner contended that the report dated July 8, 1964, was not relevant to the conditions prevailing during the assessment year 1960-61. The court found that the report was general in character and related to the overall working of the petitioner-company, which was consistent over the years. Therefore, the details in the report were relevant and could be applied to the assessment year 1960-61.

5. Allegation of Mala Fide Intention:
The petitioner alleged that the notice was issued with a mala fide intention to adopt a new basis of allocation of expenses for the earlier years. The court found no evidence to support this allegation. The court noted that the Income-tax Officer acted on the new information contained in the report dated July 8, 1964, and not merely on the principle of bifurcation approved by the Appellate Assistant Commissioner. Therefore, the initiation of proceedings under section 148 read with section 147(b) was not mala fide.

Conclusion:
The court held that the notice issued under section 148 read with section 147(b) was valid as it was based on new information obtained after the original assessment. The petition was rejected, and the petitioner-company was ordered to pay the costs of the petition.

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