1966 (9) TMI 24 - HC - Income Tax

Summary

Issues Involved:
1. Validity and legality of the notice under section 148 of the Income-tax Act, 1961.
2. Competence and jurisdiction of the Income-tax Officer to reopen the assessment under section 147(a) of the Income-tax Act, 1961.
3. Alleged failure or omission by the petitioner to disclose material facts necessary for assessment.

Issue-wise Detailed Analysis:

1. Validity and legality of the notice under section 148 of the Income-tax Act, 1961:
The petitioner challenged the notice dated February 22, 1966, issued by the Income-tax Officer under section 148 for reopening the assessment for the year 1961-62. The petitioner argued that the conditions precedent for issuing such a notice, as stipulated under section 147, were not satisfied. The court examined whether the Income-tax Officer had valid grounds for believing that income had escaped assessment due to the petitioner's failure to disclose material facts.

2. Competence and jurisdiction of the Income-tax Officer to reopen the assessment under section 147(a) of the Income-tax Act, 1961:
The petitioner contended that the Income-tax Officer lacked the jurisdiction to reopen the assessment because the conditions under section 147(a) were not met. The court noted that section 147(a) requires two conditions: (1) the Income-tax Officer must have reason to believe that income chargeable to tax has been under-assessed, and (2) this under-assessment must be due to the assessee's omission or failure to disclose fully and truly all material facts necessary for the assessment. The court emphasized that these conditions are mandatory for the Income-tax Officer to exercise jurisdiction.

3. Alleged failure or omission by the petitioner to disclose material facts necessary for assessment:
The Income-tax Officer argued that the petitioner failed to disclose the sale of property, the purchase price, the fair market value as on January 1, 1954, and the expenses incurred in the sale. The court examined the petitioner's disclosure history, including wealth-tax returns and the wealth-tax clearance certificate obtained at the time of the sale. The court found that the petitioner had disclosed all relevant facts to the officer dealing with both wealth-tax and income-tax assessments, who was the same individual, Mr. N. C. Khasnabis. The court concluded that the officer had been aware of all material facts, and the current officer's different opinion on valuation did not constitute grounds for reopening the assessment.

Conclusion:
The court held that the conditions under section 147(a) were not satisfied, as there was no failure or omission by the petitioner to disclose material facts. Consequently, the Income-tax Officer lacked the jurisdiction to reopen the assessment. The rule was made absolute, and the notice under section 148 was quashed. There was no order as to costs.