2010 (1) TMI 84 - HC - Income Tax

Main challenge to the show-cause notices is on the basis of the proviso to section 147 of the Act. By that proviso, no action shall be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year - we not expressing any opinion on any of the submissions made by the assessee as well as the Revenue and we are inclined to dismiss the writ petitions on the ground that those writ petitions were filed questioning the show-cause notices Equally we are also inclined to set aside the findings in the writ petitions rendered on the merits of the case, as the assessee/appellant should have been given an opportunity to go before the authorities with all available objections pursuant to the show-cause notices.

Summary

Issues:
1. Challenge to show-cause notices issued beyond the limitation period under section 147 of the Income-tax Act.
2. Validity of the show-cause notices and jurisdiction of the Assessing Officer.
3. Assessment of deduction under section 80-I for specific assessment years.
4. Adjudication on the merits without providing the appellant an opportunity to present objections.

Analysis:

1. The writ appeals were filed challenging the dismissal of writ petitions questioning the show-cause notices issued for the assessment years 1983-84 to 1988-89 beyond the limitation period specified under section 147 of the Income-tax Act. The appellant, a manufacturer of drilling rigs, had claimed deductions under section 80-I for these years. The issue arose when the deduction was disallowed for the assessment year 1989-90, leading to the reopening of earlier assessments through show-cause notices issued in 1992.

2. The main contention was based on the proviso to section 147, which restricts actions after four years from the relevant assessment year unless there was income escaping assessment due to non-disclosure of material facts. The court noted that the notices were beyond the four-year limit but emphasized that objections to show-cause notices can be raised only on jurisdictional grounds. The court suggested that the appellant should file returns to address grievances, allowing the Assessing Officer to consider objections.

3. The appellant argued that the Assessing Officer's differing stand for the assessment year 1989-90, which was later favored by the Tribunal, led to the disallowance of the deduction. However, the final assessment orders were pending, and the appellant contended that no orders could be passed under section 153 due to the absence of assessments.

4. The court, after considering submissions from both parties, concluded that the challenge to show-cause notices should be rejected unless based on jurisdictional grounds. The court decided to dismiss the writ petitions questioning the notices and set aside the findings on the merits, emphasizing that the appellant should have the opportunity to present objections before the authorities. The matter was remitted to the concerned authorities for the appellant to file returns as required by the show-cause notices, allowing for objections to be raised in accordance with the law and without prejudice to the rights of both parties.