1969 (2) TMI 54 - HC - Income Tax

Petitioner has prayed be set aside and quash notice issued - primary facts as appearing from the return were disclosed to the ITO and as such petitioner conduct cannot be come within the ambit of clause (a) of section 147 - as such the ITO acted without jurisdiction in issuing a notice u/s 147(a)

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income-tax Act, 1961.
2. Jurisdiction of the Income-tax Officer under Section 147(a) of the Income-tax Act, 1961.
3. Application of Section 147(b) of the Income-tax Act, 1961.
4. Exercise of jurisdiction under Article 226 of the Constitution by the High Court.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income-tax Act, 1961:
The petitioner challenged the notice dated March 14, 1966, issued by the Income-tax Officer under Section 148 of the Income-tax Act, 1961, for the assessment year 1958-59. The petitioner argued that all material facts were fully and truly disclosed during the original assessment, and thus, the notice was unjustified and should be quashed.

2. Jurisdiction of the Income-tax Officer Under Section 147(a) of the Income-tax Act, 1961:
The primary contention was whether the notice could be justified under Section 147(a), which allows reassessment if there is reason to believe that income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The petitioner argued that all necessary disclosures were made during the original assessment. The court noted that the Income-tax Officer did not deny the petitioner's claims of full disclosure, and the facts remained unchallenged.

The court referred to the Supreme Court's decision in Calcutta Discount Co. Ltd. v. Income-tax Officer, which established that two conditions must be satisfied for the Income-tax Officer to have jurisdiction under Section 147(a): (i) reason to believe that income has been under-assessed, and (ii) such under-assessment occurred due to the assessee's failure to disclose material facts. The court concluded that these conditions were not met, as the primary facts were disclosed.

3. Application of Section 147(b) of the Income-tax Act, 1961:
The court considered whether the case fell under Section 147(b), which allows reassessment if the Income-tax Officer has information leading to the belief that income has escaped assessment. The court referred to the Supreme Court's decision in Commissioner of Income-tax v. A. Raman and Co., which held that avoidance of tax liability through lawful means is permissible, but fraudulent methods to divert income can be reassessed under Section 147(b).

The court found that the Income-tax Officer did not provide specific allegations of fraudulent concealment or fictitious statements by the petitioner. Consequently, the case was deemed to fall under Section 147(b), and the notice was issued beyond the permissible four-year period, making it invalid.

4. Exercise of Jurisdiction Under Article 226 of the Constitution by the High Court:
The court addressed whether it could exercise jurisdiction under Article 226 to quash the notice. It held that if the Income-tax Officer acts beyond his jurisdiction or issues a notice after the limitation period, the High Court can intervene. The court cited the Supreme Court's decision in Madhya Pradesh Industries Ltd. v. Income-tax Officer, which supports the issuance of writs if the Income-tax Officer exceeds his jurisdiction or acts without legal authority.

Conclusion:
The court concluded that the notice issued under Section 148 was invalid as it did not meet the conditions of Section 147(a) and was time-barred under Section 147(b). The court exercised its jurisdiction under Article 226 to quash the notice and directed the respondents to cancel, recall, or forbear from giving effect to the impugned notice. The ruling applied to Civil Rules Nos. 195 to 204 of 1966, and each party was ordered to bear its own costs.

← Previous Next →