1973 (2) TMI 20 - HC - Income Tax

This is an application under article 226 of the Constitution for issue of a writ in the nature of mandamus directing the respondents to cancel or to rescind the said notice issued under section 148 - When the Tribunal observes that the amounts in question must have been earned in an earlier year whether it is a finding or direction within the meaning of section151 and whether it saves limitation for reassessment of an earlier year - observation that the said sum of Rs. 25,000 was earned by the assessee in earlier year or years, that is to say, in years prior to the assessment year 1959-60, cannot be the finding or direction within the meaning of the expressions used in sub-section (1) to section 150 of the Act of 1961 and section 150 would not be attracted for the purpose of giving effect to the aforesaid directions and observations - this application must succeed.

Issues Involved:
1. Applicability of the law at the time of the assessment year 1958-59.
2. Validity of the notice issued under section 148 of the Income-tax Act, 1961.
3. Jurisdiction and sanction for issuing the notice.
4. Interpretation of findings and directions by the Appellate Tribunal.
5. Time limits for issuing notices and assessments.

Detailed Analysis:

1. Applicability of the Law at the Time of the Assessment Year 1958-59:
The petitioner argued that the law applicable during the assessment year 1958-59 should govern the case, specifically the second proviso to subsection (3) of section 34 of the Indian Income-tax Act, 1922. The court, however, concluded that section 150 of the Income-tax Act, 1961, is applicable due to the provisions of sub-clause (ii) to clause (d) of subsection (2) of section 297 of the Act of 1961. This section states that the notice under section 148 may be issued for any assessment year if income chargeable to tax had escaped assessment, subject to the provisions of sections 149 and 150.

2. Validity of the Notice Issued Under Section 148 of the Income-tax Act, 1961:
The petitioner received a notice dated January 25, 1972, under section 148, proposing to assess income for the assessment year 1958-59. The court noted that the time limit prescribed under section 149 of the Act of 1961 had expired before the issuance of the impugned notice. The court emphasized that section 151, which requires the Board's satisfaction for issuing such a notice after eight years, must be read in conjunction with section 149.

3. Jurisdiction and Sanction for Issuing the Notice:
The petitioner contended that no valid sanction was obtained for issuing the notice. The court found that the sanction of the Central Board of Direct Taxes was obtained, as evidenced by the authentication made by the Secretary of the Board. Therefore, the requirements laid down in section 151 were deemed to be complied with, negating the petitioner's argument on this point.

4. Interpretation of Findings and Directions by the Appellate Tribunal:
The petitioner argued that the observations made by the Appellate Tribunal regarding the Rs. 25,000 could not be treated as a finding or direction within the meaning of section 150 of the Act of 1961. The court referred to the Supreme Court's ruling in the case of Income-tax Officer, "A" Ward, Sitapur v. Murlidhar Bhagwan Das, which stated that a "finding" must be a conclusion on a material question necessary for the disposal of the appeal. The court concluded that the Appellate Tribunal's observation that the sum must have been earned in earlier years was not a finding or direction necessary for the disposal of the appeal for the assessment year 1959-60.

5. Time Limits for Issuing Notices and Assessments:
The court noted that the time to issue a notice under section 148 had expired long before the impugned notice was issued. The court emphasized that section 150(1) allows for issuing a notice at any time to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act. However, since the Appellate Tribunal's observation did not qualify as a "finding" or "direction" within the meaning of section 150, the notice could not be justified under this section.

Conclusion:
The court ruled in favor of the petitioner, quashing the impugned notice dated January 25, 1972, under section 148 of the Income-tax Act, 1961. The rule nisi was made absolute, and each party was ordered to bear its own costs. The court's decision was based on the interpretation that the Appellate Tribunal's observations did not constitute a finding or direction necessary for the assessment year 1959-60, and thus, section 150 of the Act of 1961 was not applicable for issuing the notice.

← Previous Next →