1968 (2) TMI 34 - HC - Income Tax

Notice issued u/s 148 to HUF to determine the ownership of the gold and to bring the escaped income to tax in proper hands - reason for the issuance of notices - notice cannot be held to be mala fide

Summary

Issues:
1. Validity of notice under section 148 of the Income-tax Act, 1961.
2. Allegation of mala fide intention behind the notice issuance.
3. Requirement of recording reasons by the Income-tax Officer under section 148(2).
4. Bar on reassessment due to limitation under section 149(1)(b).

Validity of Notice under Section 148:
The petitioner filed a petition under articles 226 and 227 of the Constitution challenging a notice dated 18th June, 1965, issued by the Income-tax Officer under section 148 of the Income-tax Act, 1961. The notice was served on a Hindu undivided family for the purpose of determining ownership of gold and bringing escaped income to tax. The court held that the notice was valid as there was a substantial quantity of gold involved, disproportionate to the parties' disclosed income, justifying the need for assessment.

Allegation of Mala Fide Intention:
The petitioner alleged that the notice was mala fide and issued to coerce them to provide evidence against another party. However, the court found no evidence to support this claim. The court noted that the purpose of the notice was to ascertain ownership of the gold and bring escaped income to tax, rather than coercion. The petitioner's prior claims of ownership of the gold further justified the issuance of the notice.

Recording of Reasons under Section 148(2):
The petitioner argued that the Income-tax Officer failed to record reasons for issuing the notice, which was a requirement under section 148(2). The court disagreed, stating that the Officer must have recorded reasons before seeking the Commissioner's sanction. Additionally, the notice under section 147 need not specify the clause (a) or (b) it falls under, as clarified in previous court decisions, including the Supreme Court's ruling in Kantamani Venkatanarayana & Son v. First Addl. Income-tax Officer.

Bar on Reassessment due to Limitation:
The petitioner contended that the reassessment notice was barred by limitation under section 149(1)(b), arguing it fell under section 147(b). However, the court determined that the case likely fell under section 147(a) due to a lack of full disclosure of primary facts. The court declined to rule on the limitation issue, stating it should be raised before the Income-tax Officer rather than in writ proceedings, as established in previous cases like Lalji Haridas v. Income-tax Officer.

In conclusion, the court dismissed the petition, upholding the validity of the notice under section 148 and rejecting claims of mala fide intention. The court clarified the requirements for recording reasons under section 148(2) and addressed the limitation issue under section 149(1)(b), emphasizing that such matters should be raised before the Income-tax Officer rather than in writ proceedings.