2000 (10) TMI 33 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notices u/s 148 of the Income-tax Act, 1961.
2. Basis for forming an opinion about the escapement of income.
3. Limitation for assessment/reassessment.

Summary:

1. Validity of Notices u/s 148:
The petitioner, a partnership firm, challenged the notices dated March 4, 2000, issued by the Income-tax Officer u/s 148 for assessment/reassessment for the years 1993-94, 1994-95, and 1995-96. The petitioner argued that the valuation report by the Departmental Valuation Officer cannot be the basis for forming an opinion about the escapement of income u/s 147 and that the assessment/reassessment is time-barred.

2. Basis for Forming an Opinion About the Escapement of Income:
The court noted that the Assistant Director of Income-tax had issued notices to Dr. B. D. Grover, who responded by stating that the construction was done by the petitioner-firm. The Departmental Valuation Officer's report indicated a cost of construction of Rs. 27,72,361. Based on this report and the lack of explanation for the valuation difference, the Income-tax Officer formed the belief that income had escaped assessment. The court held that while the valuation report alone cannot be the sole basis for action u/s 147, it can be considered with other facts to form a belief that income had escaped assessment.

3. Limitation for Assessment/Reassessment:
The petitioner argued that the notices were time-barred as per the proviso to section 147. However, the court held that the case falls under section 149(1)(b)(ii) and (iii), which prescribe a limitation of seven years for initiating action u/s 147. Therefore, the notices were not time-barred.

The court concluded that the impugned notices did not suffer from any jurisdictional or legal infirmity and dismissed the writ petition. The court also referenced various decisions, including Phool Chand Bajrang Lal v. ITO and Raymond Woollen Mills Ltd. v. ITO, to support its conclusion that the belief formed by the Income-tax Officer was based on material facts and was bona fide.