1969 (12) TMI 31 - HC - Income Tax

Petitioner challenges a notice issued under section 148 of the Income-tax Act, 1961 - The notice is in the usual form alleging that the Income-tax Officer has reason to believe that the petitioner s income has escaped assessment within the meaning of section 147

Summary

Issues: Challenge to notice under section 148 of the Income-tax Act, 1961 for assessment year 1946-47; Reopening of assessment based on alleged non-disclosure by a dissolved firm; Interpretation of provisions under sections 2(31), 147, 155, and 183 of the Income-tax Act, 1961.

Analysis:
The petitioner challenged a notice issued under section 148 of the Income-tax Act, 1961, for the assessment year 1946-47, alleging that the Income-tax Officer had reason to believe that income had escaped assessment. The reasons for the notice included cash credit entries in the books of a dissolved firm, of which the petitioner was a partner, not considered in the firm's assessment. The petitioner argued that even if the firm had omissions, it did not justify reopening the petitioner's assessment, as a firm is a separate assessable entity from its partners under section 2(31) of the Act. The petitioner contended that specific provisions under section 189 of the Act allowed for the assessment of a dissolved firm, and subsequent amendment of the partner's assessment under section 155, thus excluding the operation of section 147 (reopening provision) for the petitioner.

The revenue argued that under section 183 of the Act, the income of a firm could be assessed in the hands of a partner, establishing a connection between the firm's income and individual partner assessments. They contended that non-disclosure by the firm could amount to non-disclosure by the partners, justifying the reopening of the petitioner's assessment. Additionally, they argued that section 155 did not bar proceedings under section 147 in this case.

The court held that the impugned notice was without jurisdiction and void as the conditions for assuming jurisdiction under section 147 against the petitioner were not fulfilled. The court found no evidence of omission or failure by the petitioner to disclose material facts for assessment. Therefore, the court ruled in favor of the petitioner, directing the recall and withdrawal of the notice under section 148 and other related notices, while allowing the revenue to proceed according to law. The court did not delve into the wider question of whether section 155 would exclude the operation of section 147. No costs were awarded in the case.