1971 (7) TMI 25 - HC - Income Tax

Madras Agricultural Income Tax Act - reassessment notice not indicating the reasons for the re-opening validity of notice - mere participating of the assessee in proceedings relating to the reassessment cannot validate these proceedings notice is held as invalid

Summary

Issues:
Assessment under section 17(4) of the Madras Agricultural Income-tax Act, 1955 without proper notice under section 35, legality of reassessment order, jurisdiction of the Commissioner of Agricultural Income-tax, sufficiency of notice under section 35, irregularities in the proceedings.

Analysis:
For the assessment year 1958-59, the petitioner was assessed for agricultural income-tax under section 17(4) of the Madras Agricultural Income-tax Act, 1955. The petitioner contended that no notice under section 35 was issued to him by the appropriate authority and even if it was, it was not served on him or acknowledged by him. The petitioner further argued that despite these lapses, an enquiry was conducted under section 35 which led to a revised order. The petitioner then filed a revision petition before the Commissioner of Agricultural Income-tax challenging the legality of the proceedings. The main contention was the lack of acknowledgment of any notice under section 35, rendering the reassessment order illegal and unsustainable. The Commissioner, however, relied on the petitioner's signature on a blank form of a notice typically used for section 35 proceedings. The High Court scrutinized the notice and found it to be blank, lacking any reason or material to justify action under section 35. The Court emphasized that the initiation of proceedings under section 35 requires a valid notice based on a belief of escapement of assessment, which was absent in this case. The Commissioner's reliance on the petitioner's participation in the enquiry held on the defective notice was deemed erroneous, as there was no proper initiation of proceedings under section 35. The Court concluded that the Commissioner failed to exercise jurisdiction properly and there was an irregularity in the challenged order.

The Court clarified that it was unnecessary to delve into the merits of the reassessment as they were not fully addressed by the Commissioner. Due to the petitioner not being properly informed about the commencement of proceedings under section 35, the Court allowed the writ petition, making the rule nisi absolute and setting aside the reassessment order. The Court held that there was no proper and sufficient service of notice under the Act, highlighting the irregularities in the entire process. The judgment favored the petitioner, emphasizing the importance of procedural compliance and proper initiation of proceedings under the relevant sections of the Agricultural Income-tax Act.