The necessity for the Assessing Officer to record satisfaction about escapement of income and the requirement for the assessee to disclose fully and truly all material facts necessary for its assessment.

N.K.Sud, J.

1. Challenge in this writ petition is to the validity of notice under Section 148 of the Income-tax Act, 1961 (for short "the Act"), by which proceedings under Section 147 of the Act (annexure P16) have been initiated to reassess the income which is alleged to have escaped assessment for the assessment year 1995-96.

2. Before adverting to the dispute, the relevant facts may first be noticed.

3. The petitioner is a public limited company incorporated under the Companies Act, 1956, and is regularly assessed to income-tax under the Act. It filed its return of income for the assessment year 1995-96 on November 28, 1995, showing a total income of Rs. 23,85,28,960. The return was subsequently revised on July 16, 1996, showing an income of Rs. 24,24,63,910. In the return filed by the assessee, it had claimed exemption under Section 10B of the Act in respect of profits and gains derived from one of its units, M/s. Annant Spinning Mills (Unit I), which was a 100 per cent, export oriented unit, amounting to Rs. 4,64,51,545. It also claimed deduction under Section 80HHC of the Act amounting to Rs. 5,51,59,320. Assessment under Section 143(3) of the Act was made on March 16, 1998, at an income of Rs. 25,06,29,080. The Assessing Officer allowed exemption under Section 10B as claimed whereas deduction under Section 80HHC was reduced to Rs. 5,29,90,077. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) who allowed certain deductions.

4. On March 30, 2001, the Assessing Officer issued the impugned notice under Section 148 of the Act observing that income chargeable to tax for the assessment year 1995-96 had escaped assessment within the meaning of Section 147 of the Act. The assessee was, therefore, required to furnish a return of income within 30 days from the service of that notice. The assessee complied with the said notice and filed the return on August 10, 2001, and also requested that a copy of the reasons recorded for initiation of proceedings under Section 147 of the Act be supplied to it so that it may file objections against the same. Since the reasons recorded by the Assessing Officer were not supplied, a reminder to that effect was sent vide letter dated August 18, 2001. Getting no response from the Assessing Officer, the petitioner addressed a letter to the Commissioner of Income-tax, Ludhiana, dated August 24, 2001, bringing it to his notice that the Assessing Officer has neither supplied a copy of the reasons recorded nor allowed inspection of the record. Another reminder was sent to the Assessing Officer on August 29, 2001. Since no reasons were being supplied, the assessee approached this court by filing the present petition.

5. Written statement has been filed on behalf of respondent No. 2 along with which copy of the reasons recorded have been enclosed as annexure R1.

6. In replication, the petitioner has pointed out that a bare perusal of the reasons recorded shows that the assumption of jurisdiction was clearly bad as the pre-requisite conditions as provided in Section 147 of the Act have not been fulfilled.

7. Mr. G.C. Sharma, learned counsel for the petitioner, pointed out that it is a case where assessment had been completed under Section 143(3) of the Act and proceedings under Section 147 are sought to be initiated after the expiry of four years from the end of the relevant assessment year. In such circumstances, it was not enough for the Assessing Officer to entertain a reason to believe that income had escaped assessment. He is further required to record satisfaction and entertain reason to believe that the escapement had resulted on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. No such satisfaction had been recorded in the reasons attached with the written statement as annexure R1. He relied on the judgment of this court in C. W. P. No. 4516 of 2003 decided on December 20, 2003 (Duli Chan