2003 (9) TMI 19 - HC - Income Tax

AO issued notice u/s 148 to file return in the prescribed form on the ground that the income assessable has escaped assessment within the meaning of section 147. The petitioner filed reply to the said notice and stated that the income-tax return has already been filed. Subsequently, the petitioner filed return of income showing the same income Held that respondents are not justified in calling upon the assessee to furnish information not connected with the reasons on the basis of which reassessment notice has been served on the assessee.

Summary

Issues:
Challenge to show cause notice under section 147 of the Income-tax Act, 1961 for the assessment year 1998-99.

Analysis:
The petitioner filed the income tax return for the assessment year 1998-99, which included income from various sources and complied with the audit report requirements. Despite filing the return, no assessment order was communicated to the petitioner. Subsequently, a notice under section 148 of the Act was issued, alleging that income assessable had escaped assessment. The petitioner contended that the Assessing Officer's failure to issue a notice within 12 months of filing the return deemed the returned income as accepted. The Department sought information regarding the claim under section 80HHC, but the petitioner argued that the Department could only inquire about specific claims and not conduct a general fishing inquiry.

The Division Bench judgment highlighted that proceedings under section 147 of the Act are limited to items of underassessment, and the finality of assessment on other issues remains undisturbed. The Assessing Officer can only make general inquiries by issuing a notice under section 143(2) within the stipulated period. After this period, seeking material unrelated to the reasons for reassessment is impermissible. The judgment emphasized that the Department cannot call for information unrelated to the reasons for issuing the reassessment notice. The Assessing Officer was directed to proceed with the assessment under section 147 in accordance with the law, clarifying that any other item of income that may have escaped assessment can be taxed during the proceedings.

In conclusion, the show cause notice under section 147 and the information sought by the Department beyond the specific claim under section 80HHC were deemed unjustified. The Assessing Officer was instructed to conduct the assessment under section 147 appropriately, without engaging in fishing inquiries unrelated to the reasons for reassessment. The writ petition was disposed of accordingly.