2011 (1) TMI 335 - HC - Income Tax

Reopening of assessment - Income escaping assessment - As the notification has been quashed and the same has not been assailed by the Revenue Department the reasons for reopening the assessment under section 147/148 of the Income-tax Act 1961 do not survive - The very basis and foundation for issue of reassessment notice have ceased to exist - Consequently the writ petition is allowed and the notice issued vide annexure E dated January 28 1987 is quashed

Summary

Issues:
1. Jurisdiction under Article 226 for setting aside a notice under section 148 of the Income-tax Act, 1961.
2. Reasons for reopening assessment based on withdrawal of approval to an institution.
3. Validity of the notification withdrawing approval and its retrospective effect.
4. Challenge to the notification in High Courts and its impact on reassessment proceedings.

Analysis:
1. The petitioner invoked the jurisdiction of the court under Article 226 to challenge a notice issued under section 148 of the Income-tax Act, 1961. The petitioner, M/s. Ultra Marine Air Aids (P.) Ltd., sought a writ of certiorari to set aside the notice dated January 28, 1987, on various grounds.

2. The Assessing Officer had reopened the assessment based on the withdrawal of approval granted to M/s. K. M. Scientific Research Centre for a donation deduction claimed by the petitioner. The reasons for reopening were communicated to the petitioner, indicating that the deduction had been allowed earlier but was impacted by the withdrawal of approval by the Central Board of Direct Taxes.

3. The petitioner's counsel highlighted a notification from August 20, 1981, granting approval to K.M. Scientific Research Centre, which was subsequently withdrawn by a notification dated January 2, 1986, with retrospective effect from January 17, 1980. Both parties agreed on the factual position regarding the withdrawal of approval.

4. The petitioner's counsel referred to judgments from the Allahabad High Court and the Bombay High Court regarding challenges to similar notifications. The Allahabad High Court had quashed the notification in the present case, leading the court to conclude that the basis for the reassessment notice no longer existed. As the notification had been quashed and not challenged by the Revenue Department, the court allowed the writ petition, quashing the notice dated January 28, 1987.

In conclusion, the court found that the withdrawal of approval to the institution had been challenged and quashed by the Allahabad High Court, rendering the basis for the reassessment notice invalid. The court allowed the petition and set aside the notice under section 148 of the Income-tax Act, 1961.