2003 (1) TMI 41 - HC - Income Tax

Challenge to notice issued u/s 148 proposing reassessment of its income. - Merely because the impugned notice was sent on the next day after receipt of the letter of the Deputy Director it could not be inferred that the Income-tax Officer did not apply his mind to the information contained in the said letter. On the basis of the said facts and information contained in the said letter the Income-tax Officer without any further investigation could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment - the writ petition is dismissed

Issues Involved:
1. Jurisdiction of respondent No.2 to initiate reassessment proceedings under sections 147(a) and 148 of the Income-tax Act, 1961.
2. Full and true disclosure of material facts by the petitioner.
3. Legitimacy of reassessment based on new information.
4. Change of opinion as a basis for reassessment.
5. Maintainability of the writ petition.

Detailed Analysis:

1. Jurisdiction of Respondent No.2:
The petitioner challenged the jurisdiction of respondent No.2 to initiate reassessment proceedings, arguing that the conditions precedent in sections 147(a) and 148 of the Income-tax Act were not satisfied. The court analyzed sections 147(a) and 148, which allow the Income-tax Officer to reopen an assessment if specific, reliable, and relevant information comes into possession subsequently, leading to a belief that income chargeable to tax had escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The court found that respondent No.2 had jurisdiction based on the new information provided by the bank after the Tribunal's decision.

2. Full and True Disclosure of Material Facts:
The petitioner claimed to have fully and truly disclosed all material facts relevant to the assessment. However, the court found discrepancies between the stock values disclosed to the bank and those reported in the return. The bank's letter dated November 22, 1982, revealed that the petitioner had not disclosed the true status of the stock hypothecated with the bank, leading to a conclusion that income chargeable to tax had escaped assessment. The court held that the petitioner had not made a full and true disclosure of material facts.

3. Legitimacy of Reassessment Based on New Information:
The court examined whether the reassessment was based on new information or merely a change of opinion. It was found that the reassessment was initiated based on new information from the bank, which was not available during the original assessment. The court cited Supreme Court judgments, including Phool Chand Bajrang Lal v. ITO and Raymond Woollen Mills Ltd. v. ITO, to support the view that reassessment can be initiated on the basis of new, specific, reliable, and relevant information.

4. Change of Opinion as a Basis for Reassessment:
The petitioner argued that the reassessment was merely a change of opinion by respondent No.2. The court rejected this argument, stating that the reassessment was based on new information that demonstrated the untruthfulness of the facts previously disclosed by the petitioner. The court emphasized that the belief of the Income-tax Officer, based on new information, is sufficient to initiate reassessment proceedings.

5. Maintainability of the Writ Petition:
The respondents argued that the writ petition was not maintainable as the petitioner had not availed of the alternative remedy of showing cause against the proposed reassessment. The court, however, focused on the merits of the case and found that the reassessment proceedings were justified based on new information. The court cited the judgment in CIT v. Ess Ess Kay Engineering Co. Pvt. Ltd. to support the view that reassessment can be initiated if the facts disclosed during the original assessment are found to be untrue based on new material.

Conclusion:
The court concluded that respondent No.2 had jurisdiction to initiate reassessment proceedings and that the petitioner had not made a full and true disclosure of material facts. The reassessment was based on new information, not a mere change of opinion. The writ petition was dismissed, and the court expected respondent No.2 to finalize the reassessment proceedings promptly.

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