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TMI Blog2007 (9) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Officer has complied with this imperative provisions? (ii) Whether in the absence of any discussion in this regard by the Tribunal, the order suffers from infirmity ?" 2. The facts relevant for the purpose of deciding the reference case are as under: 3. The assessee is a private limited company carrying on hotel and restaurant business. Original return was filed on April 12, 1989, showing loss of Rs. 646. Later on the Assessing Officer received the valuation report in respect of investment in the construction of hotel and restaurant building from D. C. L. T. In order to consider the cost of construction, as reported by the Departmental Valuer, the Assessing Officer issued a notice under section 148 of the Income-tax Act, 1961, on December 6, 1990. In response to the said notice, the assessee submitted a letter stating that the return filed on April 12, 1989, should be treated as a return in compliance with the notice under section 148 of the Income-tax Act. Accordingly, the Assessing Officer proceeded with the assessment. The assessee challenged the action of the Assessing Officer by preferring an appeal before the Commissioner of Income-tax (Appeals) who confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer was fully justified. 6. Before appreciating the rival contentions of learned counsel for the parties, I would first like to refer section 147 of the Act which reads as under "147. Income escaping assessment.— If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to. his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation.— For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005, in response to a notice served under this section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." 8. From a bare reading of the aforementioned two provisions it is manifestly clear that the jurisdiction of the assessing authority to assess or reassess under section 147(a) of the Act is subject to the conditions that he has "reason to believe" that the assessee failed to disclose all material facts necessary for assessment for the relevant assessment year. It is also incumbent upon the Assessing Officer to comply with the mandatory requirements of section 148 which casts an obligation on him to issue notice before making any assessment or reassessment and before issuance of notice he must record his reasons. 9. The question refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he records the reasons which can stand the test of relevance in accordance with the judicial pronouncements and after obtaining necessary sanction as stated above notices are issued by him but if, in any case, it is found that the reasons recorded by him are not germane to the exercise of jurisdiction under section 147(a) of the Act, then the very assumption of jurisdiction will be ab initio void rendering the entire process of assessment as a nullity. There can be hardly any doubt in holding that the recording of the reasons is a pre-requisite to the assumption of jurisdiction by the Income-tax Officer for initiating the proceedings under section 147(a). The reasons so recorded acquire much significance when the action is taken under clause (a) of section 147 because it is only the recorded reasons which can indicate as to why the Income-tax Officer was made to believe that income has escaped assessment for the relevant assessment year. Further, the language employed in section 151 clearly leads to the conclusion that the Board or the Commissioner of Income-tax, while according sanction for issuance of notice under section 148 and for coming to an objective conclusion authorising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e's reply to treat the return filed on April 12, 1989, as return in compliance of notice under section 148. (Sd.) ………………… Income-tax Officer." 12. The Tribunal, in the statement of facts, has mentioned that the notice was issued in the prescribed form without assigning any reason. It was also mentioned that after the receipt of notice the assessee requested the Assessing Officer to inform the reasons why action under section 148 of the Act had been taken. It is, therefore, clear that no reasons have been assigned by the Assessing Officer while issuing the notice under section 148 of the Act nor the assessee was furnished the detailed reasons for issuance of notice under the provisions of the said section of the Act. Section 148(2) of the Act, in a very specific term, provides that while issuing notice under section 148(1) of the Act, the Assessing Officer must assign reasons. Admittedly, the same has not been done by the assessing a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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