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1992 Supreme(Cal) 70
High Court Of Calcutta
SUBHAS CHANDRA SEN
EAST INDIA HOTELS LTD - Appellant
Versus
DEPUTY COMMISSIONER OF INCOME-TAX - Respondent
Matter Nil Of 1991
Decided On : 02/13/1992
Bhattacharjee
The sanction of the Chief Commissioner or Commissioner of Income-tax is necessary before issuance of a notice under Section 148 of the Income-tax Act, 1961, if it is issued after the expiry of four years from the end of the relevant assessment year.
Headnote:
INCOME TAX - Section 148 - Notice - Validity - Sanction of Chief Commissioner or Commissioner - Necessity - Reasons for reopening assessment - Failure to disclose material facts - Interpretation.
Fact of the Case:
The petitioner challenged the validity of a notice issued under Section 148 of the Income-tax Act, 1961, for assessing escapement of income for the assessment year 1984-85, issued beyond four years from the end of the assessment year. The reasons for reopening the case were that the assessee claimed extra depreciation over and above the normal depreciation in the return, which was not allowable as the development rebate was withdrawn. The assessee contended that the notice was void as the sanction of the Chief Commissioner or Commissioner of Income-tax was not obtained before its issuance and that there was no reason for issuance of the notice as the recorded reasons did not allege any omission or failure on the part of the assessee to disclose any material fact which led to underassessment.
Finding of the Court:
The court held that the notice issued under Section 148 of the Income-tax Act beyond four years after the end of the relevant assessment year was bad in law as the sanction of the Chief Commissioner or the Commissioner was not obtained before issuance of the notice. The court also held that the assessee had not suppressed any fact which was material for proper assessment and that the excessive depreciation allowance given by the Income-tax Officer did not make it a case of omission to disclose fully and truly all material facts.
Issues: 1. Whether the notice issued under Section 148 of the Income-tax Act beyond four years after the end of the relevant assessment year was valid without the sanction of the Chief Commissioner or Commissioner of Income-tax? 2. Whether there was any reason for issuance of the notice as the recorded reasons did not allege any omission or failure on the part of the assessee to disclose any material fact which led to underassessment?
Ratio Decidendi: 1. Section 151 of the Income-tax Act, 1961, clearly contemplates two types of cases: (i) where notices are issued before the expiry of four years from the end of the relevant assessment year, and (ii) where notices are issued beyond the period of four years from the end of the relevant financial year. In the first category of cases, the notices may be issued by an Assessing Officer below the rank of the Assistant Commissioner of Income-tax with prior approval of the Deputy Commissioner, if he is satisfied that this is a fit case for issue of such a notice. In the second category of cases, where the notice is being issued after the expiry of four years from the end of the relevant assessment year, the law is that no such notice shall be issued unless the Chief Commissioner or the Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. 2. The assessee had disclosed all the facts on the basis of which the depreciation allowance was allowed. The only fact that has come to the knowledge of the Income-tax Department after the assessment was completed is that, while filing the return, the assessee had not mentioned about discontinuation of the development rebate. This does not amount to suppression of material fact necessary for assessment.
Final Decision: The writ petition was allowed. The notice issued under Section 148 of the Income-tax Act was quashed. The Department was restrained from taking any further steps pursuant to the notice or pursuant to any assessment, if already made pursuant to the said notice till further orders of the court.
( 1 ) IN this writ petition, the petitioner has challenged the validity of a notice issued under Section 148 of the Income-tax Act, 1961. The notice has been issued for assessing escapement of income for the assessment year 1984-85. The date of the notice is August 13, 1991, which is beyond four years from the end of the assessment year in course of which the assessment proceedings were completed. The reasons for reopening the case as recorded by the Deputy Commissioner of Income-tax on August 13, 1991, are as under :"in the original return filed on December 12, 1984, the assessee claimed depreciation amounting to Rs. 11,25,934. In the revised return, there was no change so far as this claim is concerned. In the claim made in the return, the assessee claimed extra depreciation over and above the normal depreciation in the case of old as well as new plant and machinery. Apparently, this claim was made as per the terms of item III (iii) of Appendix I to the Income-tax Rules, 1962. Such extra depreciation was allowable in the case of a company using its premises as a hotel where such plant and machinery were installed provided that such hotels were approved by the Central Government for the purpose of Section 33 of the Act. From the above, it is clear that only when a hotel enjoys an approval for the purpose of grant of development rebate under Section 33 of the Act, could it be also allowed extra depreciation on old as well as new plant and machinery installed in the hotel premises, the provision of development rebate was withdrawn automatically such approval could also be treated as withdrawn (sic ). The Central Government Notification No. S. O. 2167, dated May 28, 1971 (see [1971] 81 ITR (St.) 45) issued under subsection (5) of Section 33 of the Income-tax Act, 1961, provided for discontinuation of the grant of development rebate on plant and machinery with effect from June 1, 1974. The assessee is well aware of this provision. Yet it filed a return showing greater loss than 'what it actually incurred by loading the claim of depreciation with extra depreciation amounting to Rs. 47,19,913. Therefore, the return filed on March 17, 1987, did not disclose truly and fully the total income/loss of the assessee and there was a definite failure on the part of the assessee to disclose truly and fully all material facts necessary for completion of its assessment and determination of the correct income/loss in accordance with law. Due to the aforesaid failure of the assessee to make a true and full declaration of its income, the assessment completed on March 1, 1980, resulted in an underassessment by an amount of Rs. 47,19,913. Issue notice under Section 148 to the assessee. (sd.) (A. K.
Chatterjee)dated August 13, 1991, d. C. I. T. Spl. Range-13, Calcutta. "
( 2 ) THERE is no dispute that the sanction of the Chief Commissioner or Commissioner of Income-tax was not obtained before issuance of this notice. .
( 3 ) TWO questions have been raised by Dr. Pal, appearing on behalf of the petitioner. The first is as to whether this notice is void inasmuch as the sanction of the Chief Commissioner or Commissioner of Income-tax was not obtained before issuance of the notice. The second point is as to whether there was any reason for issuance of the notice at all in view of the fact that the recorded reasons have not alleged any omission or failure on the part of the assessee to disclose any material fact which led to underassessment.
( 4 ) SO far as the first point is concerned, Section 151 of the Income-tax Act, 1961, lays down that,--"151. Sanction for issue of notice.-- (1) In a case where an assessment under Sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner, unless the Deputy Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is
