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Ranchi Club Ltd. v. Commissioner Of Income-Tax And Others.
Factual and Procedural Background
The petitioner filed an application under articles 226 and 227 of the Constitution of India seeking to quash a notice issued under section 148 of the Income-tax Act, 1961. The notice, annexure-7 to the writ application, was challenged on the grounds that it was issued without jurisdiction, as no assessment had been made under sections 143(1)(a) or 143(3) of the Act, and that the Assessing Officer had not recorded reasons prior to issuing the notice. The petitioner had filed its income-tax return for the assessment year 1991-92 under section 139(1), and an intimation under section 143 accepting the return was sent, indicating no dues. Subsequently, the Assessing Officer recorded reasons and issued a notice under section 148 initiating proceedings for escaped assessment.
Legal Issues Presented
- Whether a notice under section 148 of the Income-tax Act can be validly issued in the absence of an assessment under sections 143(1)(a) or 143(3) of the Act.
- Whether the Assessing Officer is required to record reasons before issuing a notice under section 148 of the Act.
- Whether the notice issued under section 148 in this case was lawful and valid.
Arguments of the Parties
Petitioner's Arguments
- The notice under section 148 was without jurisdiction and cannot be acted upon as no prior assessment under sections 143(1)(a) or 143(3) had been made.
- The Assessing Officer did not record reasons before issuing the notice under section 148.
Respondents' Arguments
- The notice under section 148 is valid even if no assessment under sections 143(1)(a) or 143(3) exists, provided the Assessing Officer has reason to believe income has escaped assessment.
- The Assessing Officer had recorded reasons before issuing the notice, as evidenced by annexure-5.
- The petitioner is liable to respond and furnish a return pursuant to the notice under section 148.
- The application challenging the notice is misconceived.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court examined the provisions of section 147 of the Income-tax Act and its Explanation 2(b), which clarify that a notice under section 148 can be issued even if no assessment has been made under sections 143(1)(a) or 143(3), where the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The Court noted that the petitioner had filed a return and received an intimation under section 143 accepting the return, but that the Assessing Officer had subsequently recorded reasons (as per annexure-5) before issuing the notice under section 148. This recording of reasons satisfied the procedural requirement. The Court found no merit in the petitioner's contention that the notice was invalid due to lack of prior assessment or lack of recorded reasons. Thus, the notice under section 148 was held to be lawful and valid in the circumstances.
Holding and Implications
The application to quash the notice under section 148 of the Income-tax Act is dismissed.
The direct consequence of this decision is that the notice issued to the petitioner under section 148 stands valid and the petitioner is obliged to respond accordingly. No new legal precedent was established by this ruling; the Court applied existing statutory provisions to uphold the validity of the notice.
1. By this application under articles 226 and 227 of the Constitution of India, the petitioner has prayed for quashing the notice as contained in annexure-7 to the writ application, issued under section 148 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).
2. Heard learned counsel for the parties.
3. Learned counsel appearing on behalf of the petitioner submitted that the order as contained in annexure-7 to the writ application is without jurisdiction and it cannot be acted upon, inasmuch as in the absence of an assessment made under section 143(1)(a) or section 143(3) of the Act, there cannot be any question of any income chargeable to tax having escaped assessment. It is further submitted that before issuance of notice under section 148 of the Act, the Assessing Officer has not recorded reasons for doing so.
4. Mr. Debi Prasad, learned counsel appearing on behalf of the respondents, on the other hand, submitted that the notice issued under section 148 of the Act is valid and even if no assessment has been made in terms of section 143(1)(a) or section 143(3) of the Act and the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year he may issue notice for initiation of a proceeding for escaped assessment under section 147 of the Act and the assessee is liable to respond to the said notice and furnish a return as required under section 148 of the Act.
5. Mr. Prasad further stated that the Assessing Officer before issuing the purported notice as contained in annexure-7 to the writ application has recorded reasons and the instant application is, therefore, misconceived.
6. In this case, it appears that the petitioner has filed its income-tax return for the assessment year 1991-92 under section 139(1) of the Act and pursuant thereto an intimation in terms of the provision contained in section 143 of the Act was sent to the petitioner accepting the return and claiming no dues. Thereafter, it appears that the Assessing Officer recording reasons issued notice to the petitioner, vide annexure-5 to the writ application, before initiating the proceedings under section 147 of the Act. From a bare perusal of annexure-5, it appears that the Assessing Officer has recorded reasons for issuance of notice. Since reasons have been recorded by the assessing authority in the notice (annexure-5), there is no substance in the contention raised on behalf of the petitioner that the Assessing Officer has not recorded any reason before the notice under section 148 of the Act was issued. The contention of learned counsel appearing on behalf of the petitioner that notice under section 148 of the Act could not have been issued without there being an assessment made under section 143(1)(a) and section 143(3) of the Act is equally not tenable.
7. Explanation 2(b) to section 147 of the Act deals with a situation where a return of income has been furnished by the assessee, but no assessment has been made. Section 147 and its Explanation 2(b) of the Act are as follows:
“If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year);”
8. Now, Explanation 2(b) to section 147 of the Act reads as follows:
“For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely,…
(b) where a return of income has been furnished by the assessee, but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;”
9. In our opinion, in view of the aforesaid provisions contained in section 147 of the Act and its Explanation 2(b), there cannot be doubt that even if assessment for the assessment year 1991-92 has not been made in terms of section 143(1)(a) and section 143(3) of the Act and only intimation has been sent to the petitioner in the return filed by it, the notice as contained in annexure-7 can be issued under section 148 of the Act and there is no illegality in the same.
10. For the reasons aforesaid, we do not find any merit in this application and it is, accordingly, dismissed.
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