1980 (5) TMI 16 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice issued u/s 147(a) read with s. 148 of the I.T. Act, 1961.
2. Applicability of s. 147(b) to support the notice.
3. Jurisdiction of the ITO to initiate proceedings under s. 147.

Summary:

1. Validity of the notice issued u/s 147(a) read with s. 148 of the I.T. Act, 1961:
The petitioner, an HUF represented by the karta, challenged the validity of a notice issued by the ITO on 17th February 1975, under s. 147 read with s. 148 of the I.T. Act, 1961. The original assessment for the assessment year 1970-71 was completed on 1st September 1971, considering the capital gain from the sale of a property. The ITO issued the notice without specifying whether it was under cl. (a) or cl. (b) of s. 147. The petitioner argued that all material facts were disclosed during the original assessment, making the notice under s. 147(a) without jurisdiction. The court concluded that the terms of cl. (a) of s. 147 were not attracted as the petitioner had disclosed all material facts related to the sale transaction, including the sale consideration.

2. Applicability of s. 147(b) to support the notice:
The court considered whether the notice issued under s. 147(a) could be supported by reference to cl. (b) of s. 147. The ITO had received information post-assessment that the market value of the property was higher than the sale price disclosed. The court held that this information could give the ITO reason to believe that the capital gains had been underassessed, making the provisions of cl. (b) of s. 147 applicable. Despite the ITO's initiation of action under s. 147(a), the court allowed the validity of the notice to be supported by s. 147(b).

3. Jurisdiction of the ITO to initiate proceedings under s. 147:
The court addressed the jurisdiction of the ITO to initiate proceedings under s. 147. It was noted that the ITO had received information about the market value of the property being higher than the sale price post-assessment. This information was sufficient to give the ITO reason to believe that the capital gains assessable under the Act had escaped assessment. The court emphasized that the ITO's jurisdiction to initiate proceedings was valid based on the information regarding the market value, even if the notice was initially issued under s. 147(a).

Conclusion:
The court dismissed the civil writ petition, upholding the jurisdiction of the ITO to issue the notice dated 17th February 1975. The respondents were entitled to their costs, with counsel's fee set at Rs. 200. The court did not express any opinion on the merits of the reassessment or the applicability of s. 52(2) but focused solely on the jurisdictional question.