1971 (11) TMI 40 - HC - Income Tax

This is an application challenging the notices under section 148 of the Income-tax Act, 1961, for the assessment years 1951-52 to 1962-63 and the notices dated 7th June, 1968, under section 142(1) of the said Act for the assessment years 1951-52 to 1962-63. The petitioner was served with the notices for the opening of certain assessment of a Hindu undivided family, Messrs. Pannalal Bajaj Shyam Sundar Bajaj - the notices served on the assessees did not state that they were being served in any particular capacity, therefore, the notices were liable to be quashed

Summary

Issues:
Challenge to notices under section 148 of the Income-tax Act, 1961 for assessment years 1951-52 to 1962-63 and notices under section 142(1) for the same assessment years.

Analysis:
The petitioner challenged the notices served for the assessment of a Hindu undivided family, arguing lack of materials for the Income-tax Officer to believe in the existence of the family or escaped income assessment. The main reason for reopening the assessment was information from an affidavit stating the existence of the family and its income, which the petitioner contended lacked sufficient reasons. However, the court found the reasons provided prima facie reasonable based on the affidavit. The Income-tax Officer's reliance solely on the affidavit without independent inquiry posed a difficulty as it stated the family had disrupted, making assessment post-disruption impermissible unless fraudulent or continuing existence is proven.

The court cited a previous judgment that after disruption, a Hindu undivided family cannot be assessed unless fraudulent continuation is established, which was not the case here. The notices were also challenged for not indicating whom they were served upon, following a precedent. The court found the notices vague and not in line with legal provisions, leading to their quashing for certain assessment years. Consequently, the application succeeded, and the notices for the specified assessment years were quashed, with a writ restraining the respondents from acting on them. Any final orders based on the notices were also annulled, with a stay on the order's operation for six weeks.

This judgment highlights the importance of valid reasons for reopening assessments, the necessity of independent inquiries, and adherence to legal requirements in serving notices under the Income-tax Act, 1961.