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High Court Of Calcutta
AJIT KUMAR SENGUPTA, SHYAMAL KUMAR SEN
SMT.UMA DEVI JHAWAR - Appellant
Versus
INCOME-TAX OFFICER - Respondent
PMAT 1675 Of 1989
Decided On : 12/23/1992
INCOME TAX - SECTION 148 - REASSESSMENT - JURISDICTION - CONDITIONS PRECEDENT - REASON TO BELIEVE - MATERIALS - DISCLOSURE - INSPECTION OF RECORDS - PRIVILEGED DOCUMENTS - TRIBUNAL'S FINDING - FINALITY - VALUATION OF HOUSE PROPERTY - DEPARTMENTAL VALUER'S REPORT - REOPENING OF ASSESSMENT - NON-DISCLOSURE OF MATERIAL FACTS - INVESTMENT IN CONSTRUCTION OF HOUSE PROPERTY.
Fact of the Case:
The appellant purchased a piece of land and constructed a house thereon. The appellant disclosed the cost of construction in the assessment proceedings for the assessment year 1967-68. The Income-tax Officer issued a notice under Section 148 for reassessment for the said assessment year alleging that the appellant had failed to disclose fully and truly all the material facts necessary for her assessment. The appellant challenged the validity of the notice in a writ petition.
Finding of the Court:
The court held that the Income-tax Officer did not have jurisdiction to issue the notice under Section 148. The court held that the Income-tax Officer did not have any reason to believe that the appellant had omitted or failed to disclose any material facts necessary for her assessment. The court also held that the Income-tax Officer could not rely on the valuation report of the departmental valuer to form the requisite belief under Section 147(a).
Issues: 1. Whether the Income-tax Officer had jurisdiction to issue the notice under Section 148. 2. Whether the Income-tax Officer had any reason to believe that the appellant had omitted or failed to disclose any material facts necessary for her assessment.
Ratio Decidendi: 1. A notice under Section 148 can be issued only if the conditions precedent for assumption of jurisdiction under Section 147(a) are satisfied. These conditions are that the Income-tax Officer has reason to believe that income, profits or gains chargeable to income-tax have escaped assessment, and that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to make a return of his income under Section 139 or (ii) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that year. Both the conditions are conditions precedent to be cumulatively satisfied before the Income-tax Officer could assume jurisdiction to issue notice under Section 148 read with Section 147(a). 2. The expression "reason to believe" means that there is a reason coupled with the belief. It is, therefore, open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing on the formation of belief and are not extraneous or irrelevant to the purpose of Section 147(a).
Final Decision: The appeal was allowed. The judgment and order under appeal were set aside. The impugned notice and all proceedings were quashed.
( 1 ) THIS appeal is directed against the judgment and order dated May 17, 1989, passed by the court of the first instance on a writ petition filed by the appellant. In the said writ petition, Smt. Uma Devi Jhawar, the appellant/writ petitioner challenged the validity of a notice dated March 31, 1976, issued by the Income-tax Officer, "k" Ward, Companies District-I, Calcutta, under Section 148 of the Income-tax Act, 1961 ("the Act"), for the assessment year 1967-68. By the aforesaid judgment and order dated May 17, 1989, the said writ petition was dismissed.
( 2 ) SHORTLY stated, the facts are that in the year 1964, the writ appellant purchased a piece of land at No. 24b, Carcha Road, Calcutta (also numbered as 51e, Gariahat Road, Calcutta), for a consideration of Rs. 86,000. In July, 1966, the appellant started construction of a house thereon which was completed in October, 1968. The said building was constructed at a total cost of Rs. 1,46,363. 11 paid by the appellant in four years from 1967 to 1970.
( 3 ) IN the course of the assessment proceedings for the said assessment year 1967-68, the appellant furnished details of the said cost of construe tion in each year and also filed a valuation report dated November 21, 1968, of J. Ganguli and Co. , surveyor and valuer. In this connection, the appellant also filed a letter dated March 16, 1972, explaining the cost of construction.
( 4 ) BY an order of assessment dated March 23, 1972, made under Section 143 (3) of the Act the appellant was assessed for the said assessment year 1967-68 on a total income of Rs. 13,670.
( 5 ) IN the course of the said assessment proceedings, the appellant disclosed the fact of purchase and construction of the said house property. It is relevant to point out here that in the assessment for the assessment year 1969-70, the Income-tax Officer, on the basis of a valuation report dated November 21, 1968, estimated the said cost of construction of the said house property and made an addition of Rs. 48,182. The said addition was deleted by the Appellate Assistant Commissioner by his order dated October 17, 1973. The Department preferred an appeal to the Tribunal. The Tribunal, by its order dated March 26, 1975, dismissed the said appeal of the Department and held, inter alia, that before the Income-tax Officer books of account maintained for the construction and other details supported by vouchers were produced. The Income-tax Officer had not pointed out any defect in the accounts or bills produced. Hence, the said accounts could not be rejected. In the circumstances, the appeal was dismissed.
( 6 ) ON March 31, 1976, the appellant received from respondent No. 2 (the Income-tax Officer) a notice dated March 31, 1976, issued by him under Section 148 for the assessment year 1967-68 wherein respondent No. 2 alleged that he had reason to believe that the income of the appellant for the said assessment year had escaped assessment within the meaning of Section 147 of the Act which he proposed to reassess and, hence, required the appellant to file the return for the said assessment year. It was alleged that the said notice was issued after obtaining the satisfaction of respondent No. 3 (Commissioner, West Bengal XII, Calcutta ).
( 7 ) THE appellant, by a letter dated April 27, 1976, protested against the said notice dated March 31, 1976, and required the Income-tax Officer to disclose the reasons for the said notice. No reply was given by the Income-tax Officer.
( 8 ) ON May 25, 1976, the writ petition herein was moved challenging the legality and validity of the said notice dated March 31, 1976, when a rule nisi and interim order was granted by this court.
( 9 ) THE writ petition came up for hearing in May, 1989, before the court of the first instance when, it appears, no one appeared for the respondents, no affidavit on behalf of the respondents was filed and no records were produced. In the aforesaid circumstances, the hearing wa
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