2004 (4) TMI 45 - HC - Income Tax

Reassessment proceedings - with regard to the assessment years 1997-98 and 1999-2000 the assessments were not completed u/s 143(3) but u/s 143(1). In this connection it was necessary to take sanction of the Deputy Commissioner u/s 151(2) for issuing notices u/s 148 but such sanction has not been obtained - notice dated March 3 2003 under section 148 for the assessment year 1997-98 in respect of the petitioner was issued beyond four years of the expiry of the assessment year. Hence the said notice is also illegal on this ground. - For the reasons given above the impugned notices and assessment proceedings are quashed. The writ petition is allowed.

Summary

Issues:
1. Validity of reassessment proceedings against the petitioner for assessment years 1996-97, 1997-98, and 1999-2000.
2. Proper enquiry by the assessing authority regarding rental income and investment in construction.
3. Legality of notices issued under section 148 for reassessment.
4. Compliance with section 151(2) of the Income-tax Act for issuing notices under section 148.

Issue 1:
The court considered the validity of reassessment proceedings against the petitioner for the assessment years 1996-97, 1997-98, and 1999-2000. It was noted that the assessing authority had made detailed enquiries before passing the assessment orders for these years. The court emphasized that once an assessment is proposed under section 143(3), all relevant enquiries must be conducted. The court held that the notice under section 148 for reassessment was invalid as it was based on a change of opinion, citing a previous judgment. The court also referred to a Supreme Court decision stating that in assessment proceedings, the Assessing Officer cannot refer the question of the cost of construction to the Valuation Officer, deeming the notices and assessment proceedings illegal.

Issue 2:
The court analyzed the proper enquiry conducted by the assessing authority regarding rental income and investment in construction. It was found that the District Valuation Officer determined the value of the investment made by the petitioner and his brothers in the building at Minhazpur Garhi, Allahabad. The court noted that assessments for the years 1996-97, 1997-98, and 1999-2000 had been completed, and the value of the investment had been accepted in these assessments. The court concluded that the reassessment notices were invalid due to a lack of proper grounds and compliance with legal requirements.

Issue 3:
Regarding the legality of notices issued under section 148 for reassessment, the court found that the notices for the assessment years 1996-97, 1997-98, and 1999-2000 were beyond the prescribed time limit of four years from the end of the relevant assessment year. As per section 151(2) of the Income-tax Act, the Assessing Officer below the rank of Deputy Commissioner cannot issue notices after this period without the Deputy Commissioner's satisfaction. Therefore, the court deemed the notices illegal on this ground as well.

Issue 4:
The court addressed compliance with section 151(2) of the Income-tax Act for issuing notices under section 148. It was observed that the notice for the assessment year 1997-98 was issued beyond the four-year limit, rendering it illegal. The court emphasized the necessity of obtaining proper sanction for issuing notices under section 148, highlighting the importance of adhering to statutory requirements. Consequently, the court quashed the impugned notices and assessment proceedings, allowing the writ petition.