2005 (8) TMI 71 - HC - Income Tax

In this writ petition, by invocation of the provisions of article 226 of the Constitution of India, the challenge is against the reassessment order- Whether initiation and subsequent completion of the impugned reassessment order under section 148 of the Act has been without jurisdiction, as there was no reason to believe as provided in section 147 of the Act, as the authority had no supporting material? - After having taken into account the overall picture emerging from the record of the present case, factual catalogue of the circumstances, events and procedure followed by the assessing authority before passing the impugned reassessment order, as well as, rival submissions and the above settled proposition of law, we are of the clear opinion that there is no occasion for our interference under the constitutional writ jurisdiction under article 226 of the Constitution of India in the present case.

Issues Involved:
1. Jurisdiction of reassessment under Section 148 read with Section 147 of the Income-tax Act, 1961.
2. Validity of the reassessment order based on "reason to believe."
3. Obligation to exhaust statutory remedies before invoking Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Jurisdiction of reassessment under Section 148 read with Section 147 of the Income-tax Act, 1961:

A search and seizure operation was conducted on May 8, 2003, under Section 132 of the Act, leading to the discovery of documents indicating unaccounted investments by the assessee. The reassessment proceedings were initiated by issuing a notice under Section 148 read with Section 147 on March 10, 2004. The authority formed the opinion that there was "reason to believe" that the income for the assessment year 1997-98 had escaped assessment, based on the seized documents and the assessee's inability to explain the investments and receipts. Approval for reopening the assessment under Section 151(2) was obtained, followed by the issuance of notices under Sections 148 and 142(1).

2. Validity of the reassessment order based on "reason to believe":

The court examined whether the reassessment order was without jurisdiction due to the lack of "reason to believe." The assessee argued that the formation of the opinion was unsupportable without requisite material, making the order without jurisdiction. However, the court found that the impugned order could not be labeled as one without jurisdiction. It held that insufficiency or inadequacy of the reasons or materials does not divest the authority of its power under Sections 147 and 148. The court concluded that the impugned reassessment order was not without jurisdiction, and the assessee was obliged to take recourse to the statutory appellate provision under the Act.

3. Obligation to exhaust statutory remedies before invoking Article 226 of the Constitution of India:

The court emphasized the specific provision under Section 246 in Chapter XX of the Act, relating to appeals and revisions. It noted that the impugned reassessment order is appealable under Section 246(1). The court held that the assessee cannot bypass the statutory remedy of appeal by invoking Article 226. The court referred to the Supreme Court's decision in GKN Driveshafts (India) Ltd. v. ITO, which outlined the proper procedure for challenging a notice under Section 148. The court reiterated that the assessee must first file a return and, if desired, seek reasons for issuing the notice, which the Assessing Officer must furnish within a reasonable time. The court concluded that the assessee must follow the statutory procedure and cannot short circuit the provisions prescribed for challenging the impugned order in a higher forum.

Conclusion:

The court dismissed the writ petition, directing the petitioner to pay costs of Rs. 5,000 to the Patna High Court Legal Services Committee within eight weeks. The court held that the reassessment order was not without jurisdiction and that the assessee must exhaust the statutory remedy of appeal before invoking the constitutional writ jurisdiction under Article 226. The observations made were tentative and not on the merits of the case, emphasizing the need to follow the statutory appellate procedure.

← Previous Next →