1972 (3) TMI 20 - HC - Income Tax

Notice under section 148 - petitioner, therefore, submits that the purported action of the respondent No. 1 to assess the salary income of the petitioner on due basis and not on actual receipt basis is amounting to and/or will amount to a mere change of opinion and, as such, the respondent No. 1 had no competence, jurisdiction or authority to initiate the purported reassessment proceeding under section 148 - petitioner also contended that the purported notice under section 148 of the Act dated 30th March, 1971, which was served upon the petitioner on the 1st April, 1971, as alleged by him, is barred by limitation and that the said notice for reassessment for the assessment year 1962-63, was issued in violation of section 149 of the Act.

Issues Involved:
1. Jurisdiction under Section 148 of the Income-tax Act.
2. Limitation under Section 149 of the Income-tax Act.
3. Validity of notice under Section 148.
4. Proper sanction under Section 151 of the Income-tax Act.
5. Nature of the reassessment proceeding.

Detailed Analysis:

1. Jurisdiction under Section 148 of the Income-tax Act:
The petitioner contended that the Income-tax Officer (ITO) had assumed jurisdiction under Section 148 of the Act to reassess the salary income on a "due basis" instead of an "actual receipt basis." The petitioner argued that this action amounted to a mere change of opinion, which does not confer jurisdiction on the ITO to initiate reassessment proceedings under Section 148. The original assessment had been made after a thorough examination of the material, and the ITO was fully satisfied with the said material.

2. Limitation under Section 149 of the Income-tax Act:
The petitioner argued that the notice dated 30th March 1971, served on 1st April 1971, was barred by limitation as per Section 149 of the Act. The petitioner further contended that the reassessment notice for the assessment year 1962-63 was issued beyond the permissible time limit of eight years. The petitioner also argued that the relevant period of limitation should be four years under Section 147(b), as the reassessment was based on information from the Appellate Assistant Commissioner's order.

3. Validity of Notice under Section 148:
The petitioner contended that the notice dated 30th March 1971, was illegal, invalid, and inoperative because it was issued without obtaining the necessary sanction from the Commissioner of Income-tax or the Central Board of Direct Taxes, as required under Section 151 of the Act. The petitioner also argued that the notice was used as a mere cloak for making a fishing enquiry or investigation, which is not permissible under Section 148.

4. Proper Sanction under Section 151 of the Income-tax Act:
The petitioner contended that the notice was issued without the necessary sanction, making it illegal and inoperative. The ITO, in his affidavit, admitted that the sanction was inadvertently not stated in the notice. The court examined the original file and found a rubber stamp above the Commissioner's signature, which was not sufficient to prove that the Commissioner had applied his mind while according the sanction. This mechanical sanction rendered the notice invalid.

5. Nature of the Reassessment Proceeding:
The petitioner argued that there was no omission or failure on his part to disclose material particulars of his income. The reassessment was based on the Appellate Assistant Commissioner's decision, which is judicial information and falls under Section 147(b). Therefore, the period of limitation should be four years, not eight years. The court agreed, stating that the reassessment was based on judicial information and not on any omission or failure by the petitioner.

Conclusion:
The court found that the notice dated 30th March 1971, was barred by limitation and invalid due to lack of proper sanction. The reassessment proceedings were based on judicial information, falling under Section 147(b) with a four-year limitation period. The rule was made absolute, and the notice under Section 148 was cancelled. No order as to costs was made.

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