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Issues Involved:
1. Legality of the notice under Section 148 of the Income-tax Act, 1961. 2. Competence of the authority issuing the notice. 3. Adequacy of the disclosure of material facts by the assessee. 4. Justification for reopening the assessment. Issue-wise Detailed Analysis: 1. Legality of the notice under Section 148 of the Income-tax Act, 1961: The appeal by the Revenue questioned the legality and correctness of the judgment of the learned single judge, who quashed the proceeding under Section 148 of the Income-tax Act, 1961. The learned single judge found that the assessee had furnished all the materials necessary for assessment, including the audited profit and loss account, balance-sheet, and other documents. The unadjusted amount of advance received from the Forest Utilisation Officer (FUO) was specifically shown under the head "Current liability." The learned single judge concluded that the impugned notices were unsustainable and quashed them. 2. Competence of the authority issuing the notice: The learned single judge also found fault with the authority issuing the notice, stating that the power to issue notice under Section 147 of the Act is given to the Income-tax Officer as defined under Section 2(25) of the Act. The notices dated February 8, 1989, and March 30/31, 1989, were not issued by the competent authority and were accordingly quashed. However, on appeal, it was argued that the Assistant Commissioner of Income-tax and the Deputy Commissioner of Income-tax (Assessment), Special Range-II, were competent to issue the impugned notice. The court set aside the finding of the learned single judge on this point, holding that the authorities were within their competence in issuing the notice. 3. Adequacy of the disclosure of material facts by the assessee: The Revenue contended that the assessee failed to disclose certain material facts, such as the agreement with the FUO, advance payments received, and the stock of railway sleepers. The learned single judge, however, found that the assessee had made a true and full disclosure of all primary facts necessary for assessment. The court emphasized that mere production of books of account and balance-sheet was not sufficient in the absence of true and full disclosure of all material facts. The court held that if the assessee made a true and full disclosure of the primary facts, his obligation ended there, and it was for the Assessing Officer to draw the right inference from the primary facts. 4. Justification for reopening the assessment: The court examined whether there were facts from which it could be believed that there was a failure or omission to disclose fully or truly material facts necessary for assessment. It was found that the company had filed its return of income along with all necessary documents and particulars. The order sheet dated March 30, 1989, recounted the facts and mentioned that the assessee was asked to show cause as per the letter dated February 8, 1989. The learned single judge found that there was no failure on the part of the assessee to disclose all the materials necessary for making the assessment. The court concluded that the nexus sought to be built up by the Revenue for reopening the assessment appeared to be nebulous, and the notices issued under Section 147 could not be sustained. Conclusion: The court upheld the judgment of the learned single judge, finding no merit in the appeal by the Revenue. The appeal was dismissed, and the notices issued to the respondent-assessee under Section 147 were quashed. The court emphasized that the obligation on the assessee is to make a true and full disclosure of the primary facts, and it is for the Assessing Officer to draw the right inference from those facts. The court declined to interfere with the learned single judge's conclusion in favor of the respondent/writ petitioner.
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