1970 (6) TMI 12 - HC - Income Tax

Petitioner, a partnership firm, has filed this application for obtaining a writ to quash and set aside the notices served upon it under section 148 of the Indian Income-tax Act, 1922, for the reassessment of its income

Summary

Issues Involved:
1. Validity of reassessment notices under Section 148 of the Indian Income-tax Act, 1922.
2. Whether the Bangalore firm was an independent entity or a branch of the petitioner-firm.
3. Jurisdiction of the Income-tax Officer to reopen assessments under Section 147(a) of the Act.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Notices under Section 148:
The petitioner, M/s. Ishverlal & Brothers, sought to quash the reassessment notices served under Section 148 for the assessment years 1959-60, 1960-61, and 1961-62. The petitioner argued that the department had no cause for initiating reassessment under Section 147(a) as all primary facts were disclosed during the original assessment. The court found that the petitioner had disclosed all material facts necessary for the assessment, including the assessment orders of the Bangalore firm. Consequently, the court ruled that the reassessment notices were invalid and without jurisdiction.

2. Whether the Bangalore Firm was an Independent Entity or a Branch of the Petitioner-Firm:
The petitioner argued that the Bangalore firm, constituted under a separate partnership deed dated 24th October 1957, was an independent entity and not a branch of the petitioner-firm. The department contended that the Bangalore firm continued to be a branch and its income should be clubbed with the petitioner-firm's income. The court noted that the petitioner had disclosed all relevant facts about the Bangalore firm during the original assessment, and the Income-tax Officer had treated the Bangalore firm as an independent entity. Therefore, the court found no failure on the part of the petitioner to disclose material facts.

3. Jurisdiction of the Income-tax Officer to Reopen Assessments under Section 147(a):
The court examined whether the Income-tax Officer had jurisdiction to reopen the assessments under Section 147(a). The department argued that the petitioner had failed to disclose fully and truly all material facts necessary for the assessment. However, the court found that all primary facts were disclosed, and the non-disclosure alleged by the department pertained to inferential facts, not primary facts. The court held that the petitioner was not required to disclose inferences but only primary facts. Since the petitioner had disclosed all necessary facts, the court ruled that the Income-tax Officer had no jurisdiction to reopen the assessments under Section 147(a).

Conclusion:
The court allowed the writ petition, quashing the reassessment notices issued under Section 148 and setting them aside. The court found that the petitioner had disclosed all material facts necessary for the assessment and that the Income-tax Officer had no jurisdiction to reopen the assessments under Section 147(a). The petition was allowed with costs.