1974 (3) TMI 2 - HC - Income Tax

This writ petition is directed against a notice of the Income-tax-cum-Wealth-tax Officer Ward VIII New Delhi dated 29th March 1966 issued under section 148 of the Income-tax Act 1961 for the assessment year 1957-58 intimating that the Income-tax Officer had reason to believe that the income of the petitioner for the said assessment year had escaped assessment and he proposed to reassess the same and that the notice had been issued after obtaining the necessary satisfaction of the Commissioner of Income-tax

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income-tax Act, 1961.
2. Validity of the grounds for reopening the assessment.
3. Adequacy of the Commissioner's sanction under Section 151 of the Income-tax Act, 1961.

Detailed Analysis:

1. Legality of the notice issued under Section 148 of the Income-tax Act, 1961:
The writ petition challenges the notice issued by the Income-tax-cum-Wealth-tax Officer, Ward VIII, New Delhi, dated 29th March 1966, under Section 148 of the Income-tax Act, 1961, for the assessment year 1957-58. The petitioner contends that the notice was illegal and invalid, arguing that all primary facts had been disclosed during the original assessment, and there was no valid ground for reopening the case. The respondents, however, maintain that the notice was issued after obtaining the necessary approval from the Commissioner of Income-tax, asserting that the loans amounting to Rs. 25,000 were considered bogus.

2. Validity of the grounds for reopening the assessment:
The Income-tax Officer's belief that the income had escaped assessment was based on the assertion that some hundi bankers had stated they never gave genuine loans to any party. Upon examination, it was found that none of the lenders for the relevant assessment year (1957-58) had made such statements. The only reference was to Sobhraj Dhanrajmal, who had advanced loans in a subsequent year (1959-60), which was irrelevant to the year in dispute. The court concluded that suspicion regarding a party with whom the petitioner had no dealings during the assessment year in question could not constitute a valid basis for reopening the assessment.

3. Adequacy of the Commissioner's sanction under Section 151 of the Income-tax Act, 1961:
The court scrutinized the report submitted by the Income-tax Officer to the Commissioner, which was found to be incomplete and not a true copy. The Commissioner had merely written "yes" against the question of whether it was a fit case for issuing a notice under Section 148, without adequately considering the reasons provided by the Income-tax Officer. The court referenced the Supreme Court's ruling in Chhugamal Rajpal v. S. P. Chaliha, emphasizing that the Commissioner must not mechanically accord permission and must ensure that the Income-tax Officer has some prima facie grounds for taking action. The court concluded that the sanction granted by the Commissioner was invalid and ineffective as it did not meet the legal requirements.

Conclusion:
The court held that the Income-tax Officer did not have a bona fide reason to believe that any income chargeable to tax had escaped assessment. The sanction of the Commissioner under Section 151 was deemed invalid and ineffective. Consequently, the writ petition was allowed, and a writ of mandamus was issued directing the respondents not to enforce the impugned notice under Section 148 for the assessment year 1957-58. The court clarified that this judgment does not prevent the authorities from taking action in respect of other assessment years or notices issued according to law. The parties were left to bear their respective costs.

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