RAKESH AGARWAL Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This writ petition by the legal heir .of Late Shri R.S. Agarwal, (hereinafter referred to as the assessee) validity the validity of a notice dated 2 August 1991, issued by the Assistant Commissioner of Income-tax, Central Circle- 12, New Delhi under Section 148 of the Income-tax Act, 1961 (for short the Act) proposing to re-assess certain income on the ground that it has escaped assessment for the assessment year 1987-88.

(2.) For the relevant assessment year, the assessee clams to have filed his return of income on 30 July 1987 in Ward 15(6), New Delhi decidring a total income of Rs. 18,55,100.00. The total income so declared included the net income of Rs. 18,240.00 from a house property at A-5, Gulmohar Park, New Delhi, let out to Hotel Banjara Ltd., at a gross annual rent of Rs. 92,000.00. The total income also included income from "Salary" from Hotel Banjara Ltd. Though the assessee claims that after filing of the said return of income a notice under Section 143(2) of the Act was issued by the Income-tax Officer Ward 15(6), and, in response there to he had filed a letter dated 26 September, 1989, the issue of any such notice is denied by the revenue. It, however, appears that subsequently another return of income for the assessment year in question, marked as 'duplicate', was filed on 26 February, 1990 before another officer, namely, the Deputy Commissioner of income-tax (Special Range 12), New Delhi, who vide his order dated 15 March, 1990 paused the assessment order under Section 143(1) of the Act, accepting the income declared. by the assessee. No further tax was found to be payable by the assessee. Thereafter, vide order dated 11/16 July, 1991, the Commissioner of Income-tax, Delhi IX transferred the case of the assessee from Deputy Commissioner, Special Range-12 to Assistant Commissioner, Central Circle 12, who has now issued the impugned not i. e under Section 148 of the Act, requiring the assessee to file the return as he has reason to believe that certain income chargeable to tax for the said assessment yeas had escaped assessment within the meaning of Section 147(a) of the Act, inasmus has : (i) the rent from the properties was kept low and for the difference in rent the assessee was compensated by giving interest free security of Rs. 8.00 lacs and Rs. 6.82 lacs, which fact came to light during the course of assessment proceedings for the assessment year 1988-89 from assessee's own letter dated 20 February, 1991, (ii) as compared to the assessment year 1988-89 excessive claim for the municipal taxes had been made and allowed in the relevant assessment year, and (iii) value of perquisites provided by Hotel Banjara Ltd in the form of free residential accommodation and other assets had not been included in the income from salary from Hotel Banjara Ltd.

(3.) The proposed action of the Assistant Commissioner is challenged primarily on the ground that the assessee had made true and full disclosure of all primary facts necessary for the assessment for the relevant assessment year, the condition precedent for exercise of jurisdiction undersection 147(.) of the Act, viz., that the income chargeable to tax should have escaped assessrnent for that year "by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year" did not exist and therefore, the impugned notice was illegal and without jurisdiction, in view of the law laid down by the Supreme Court in I.T.O. v. Lakhmani MewalDas ,103 (1976) ITR 437 (SC), I.T.O. v. Madnani Engineering Works Ltd., 118 (1979) ITR I (SC) and Indian Oil Corporation v. I.T.O., 1986(2) SCR 1107; (1986) 159 ITR 956, respectively, holding that the reasons which lead to the formation of the belief contemplated by Section 147(a) must have a material bearing on the question of escapement of income of the assessee from assessment because of its failune or omission to disclose fully and truly all material facts; the validity of initiation of reassessment proceed- ings has to be judged with reference to the material available with the officer at the time of the issue of notice under Section 148 and not with reference to the material that may have come to light subsequently in the course or re-assessment proceedings and there must be materials to come to the conclusion that there was "omission or failure to disclose fully and truly all material facts necessary for the assessment of the year".