1972 (6) TMI 21 - HC - Income Tax

This application under article 226 of the Constitution is directed against a notice under section 148 of the Income-tax Act, 1961, issued by the Income-tax Officer

Summary

Issues Involved:
1. Legality of the notice under Section 148 of the Income-tax Act, 1961.
2. Conditions precedent for exercising jurisdiction under Section 147(a).
3. Validity of the subsequent inquiries and reports.
4. Change of opinion by the Income-tax Officer.
5. Satisfaction of the Commissioner under Section 151(2).

Detailed Analysis:

1. Legality of the Notice under Section 148 of the Income-tax Act, 1961:
The petitioner, a partnership firm, challenged the notice issued under Section 148 on the grounds that it was without jurisdiction. The notice was issued by the Income-tax Officer on 17/18th October 1961, on the belief that income chargeable to tax for the assessment year 1959-60 had escaped assessment. The petitioner's case was that all material facts were fully disclosed during the original assessment proceedings, and hence, the conditions for invoking Section 147(a) were not met.

2. Conditions Precedent for Exercising Jurisdiction under Section 147(a):
The petitioner argued that the conditions precedent for exercising jurisdiction under Section 147(a) were non-existent. The Income-tax Officer had initially completed the assessment on 23rd December 1959, which was later rectified on 10th March 1960. The petitioner submitted that all material facts were disclosed, and the assessment was based on these disclosures. Therefore, the reopening of the assessment under Section 147(a) was not justified as it was merely a change of opinion by the succeeding Income-tax Officer.

3. Validity of the Subsequent Inquiries and Reports:
The notice under Section 148 was based on the report of an income-tax inspector dated 4th March 1961, which mentioned that some of the cash depositors were not traceable and lacked the capacity to make the deposits. The petitioner's counsel argued that these subsequent inquiries and the inspector's report were invalid as they were conducted after the original assessment was completed. The court noted that the original Income-tax Officer had already enquired into the genuineness of the deposits and accepted the statements of the depositors.

4. Change of Opinion by the Income-tax Officer:
The court observed that the succeeding Income-tax Officer took a different view from that of the original officer based on the inspector's report. The court held that this constituted a mere change of opinion and did not justify the initiation of proceedings under Section 147(a). The court emphasized that the provisions of Section 147(a) are not attracted in cases of mere change of opinion, as supported by the Supreme Court decision in Commissioner of Income-tax v. Bhanji Lavji.

5. Satisfaction of the Commissioner under Section 151(2):
The petitioner's counsel also argued that the satisfaction of the Commissioner, as required under Section 151(2), was lacking. However, the court did not find it necessary to decide on this submission due to the absence of the Commissioner before the court and the decision on other grounds.

Conclusion:
The court allowed the application, quashing the impugned notices under Section 148. The court held that the notice was without jurisdiction as it was based on a mere change of opinion by the succeeding Income-tax Officer and not on any failure by the assessee to disclose material facts. The rule nisi was made absolute, with no orders as to costs.