1970 (5) TMI 13 - HC - Income Tax

Whether a fresh notice u/s 147(a) of Income-tax Act, 1961 for reassessment on the same facts would be valid - Held, no - Officer can initiate proceedings on new information or material u/s 147(b)

Summary

Issues:
Validity of notice under section 148 of the Income-tax Act, 1961 for the assessment year 1948-49. Jurisdiction of the Income-tax Officer to issue the notice under section 148. Applicability of section 147(a) and section 147(b) in initiating proceedings.

Analysis:

The petitioner challenged the validity of a notice dated 24th March, 1965, issued under section 148 of the Income-tax Act, 1961 for the assessment year 1948-49. The original assessment order was passed in 1952, and the petitioner had obtained loans during the assessment year. The Income-tax Officer reopened the assessment in 1957, adding the loan amount as undisclosed income. The Appellate Assistant Commissioner held that there was no valid service of notice under section 34(1)(a) and vacated the assessment order, stating that the loans were genuine and no new information justified reopening the assessment.

The department appealed to the Appellate Tribunal, but later withdrew the appeal. Subsequently, another notice was issued under section 148 in 1965. The department's case was based on the belief that income had escaped assessment due to the petitioner's failure to disclose all material facts. However, the Appellate Assistant Commissioner's findings were binding, as the department did not proceed with the appeal, rendering the notice invalid.

Referring to a Supreme Court case, the judgment emphasized that if a finding by a tribunal, even if by mistake, negates the Income-tax Officer's reason to believe that income escaped assessment, the officer cannot reopen the assessment. The Income-tax Officer's attempt to initiate proceedings based on new information was deemed invalid under section 147(a) and time-barred under section 147(b), leading to the cancellation of the notice under section 148 for the assessment year 1948-49.

The judgment concluded by issuing a writ of mandamus directing the respondents to cancel the notice, with no costs awarded and a stay of operation for four weeks. The ruling highlighted the importance of adhering to legal procedures and respecting the binding nature of tribunal findings in tax assessment matters.