1972 (12) TMI 32 - HC - Income Tax

The jurisdiction of the Income-tax Officer, A-Ward, Quilon, to issue notices under section 148 of the Income-tax Act, 1961, against the petitioner, for the assessment years 1961-62 to 1963-64 is challenged in these proceedings.

Issues Involved:
1. Jurisdiction of the Income-tax Officer to issue notices under section 148 of the Income-tax Act, 1961.
2. Compliance with the conditions precedent for issuing notices under section 148.
3. Applicability of section 147(a) versus section 147(b) of the Income-tax Act.
4. Compliance with section 151 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Income-tax Officer to Issue Notices under Section 148:
The petitioner, a firm engaged in the cashew nut business, challenged the jurisdiction of the Income-tax Officer (ITO) to issue notices under section 148 for the assessment years 1961-62 to 1963-64. The notices sought to be quashed were based on the ITO's belief that income had escaped assessment due to the petitioner's failure to disclose fully and truly all material facts. The ITO's belief was triggered by information received from Bombay income-tax authorities about bogus hundi transactions involving the petitioner.

2. Compliance with Conditions Precedent for Issuing Notices under Section 148:
The court examined whether the jurisdictional conditions for issuing notices under section 148 were satisfied. The Supreme Court's rulings in cases like S. Narayanappa v. Commissioner of Income-tax and Kantamani Venkata Narayana and Sons v. First Additional Income-tax Officer were referenced. The court observed that if there are reasonable grounds for the ITO to believe that there had been non-disclosure of material facts, it would be sufficient to give jurisdiction to issue the notice. The sufficiency of the grounds is not justiciable, but the existence of the belief can be challenged. The court found that the ITO had reasonable grounds to believe that the petitioner had not made a full and true disclosure, thus satisfying the conditions for issuing the notice.

3. Applicability of Section 147(a) versus Section 147(b) of the Income-tax Act:
The petitioner argued that the facts would, if at all, attract section 147(b) and not section 147(a). Section 147(a) applies when there is a failure to disclose material facts, while section 147(b) applies when the ITO has reason to believe that income has escaped assessment due to information in his possession. The court concluded that the ITO had reason to believe that the petitioner had not made a full and true disclosure, thus justifying action under section 147(a). The court also noted that the subsequent information received from Bombay authorities provided a valid basis for the ITO's belief.

4. Compliance with Section 151 of the Income-tax Act:
The petitioner contended that section 151, which requires the Board's or Commissioner's satisfaction for issuing notices after a certain period, had not been complied with. The court examined the files and found that the ITO had recorded the reasons for taking action and that the Board and Commissioner were satisfied that the case was fit for issuing the notice. The court referenced the Supreme Court's decisions in Chhugamal Rajpal v. S. P. Chaliha and Madhya Pradesh Industries Ltd. v. Income-tax Officer, and concluded that section 151 had been duly complied with.

Conclusion:
The High Court dismissed the writ petitions, holding that the ITO had jurisdiction to issue the notices under section 148, the conditions precedent for issuing the notices were satisfied, the action was justified under section 147(a), and section 151 had been properly complied with. The court emphasized that the petitioner could still raise objections, including jurisdictional ones, before the ITO during the reassessment proceedings.

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