MOIDU Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The question arising for consideration in this writ petition is whether the order passed by the Income Tax Officer, Cannanore directing refund of an amount by the petitioner was passed without jurisdiction. For the assessment year 1956-57, the petitioner was assessed under the Income Tax Act, 1922, by the Income Tax Officer, Cannanore, and as per the said order his total income was determined at Rs. 4,619/-. This total income included the dividend income from the shares held by the petitioner. The said income was grossed up and added to the total income and credit given for the tax on the dividend. Accordingly a refund of Rs. 837.37 was granted to the petitioner in the order of assessment. Thereafter the respondent issued a notice under S.148 of the Income Tax Act, 1961, calling upon the petitioner to deliver to him within 30 days of the receipt of the notice a return of the income of the petitioner. In that notice it was stated that the respondent had reason to believe that there was an escapement of income chargeable to tax for the assessment year 1956-57. Pursuant to the notice the respondent passed an order purporting to be one under S.143(3) read with S.147 of the Income Tax Act, 1961, stating that the income assessed in the hands of the petitioner actually belonged to A.K. Tarwad as the investments made in the name of the petitioner were out of the funds of the said tarwad. The respondent therefore found that the income was not liable to be assessed in the petitioner's hands, and , excluded the dividend income and held that the petitioner had no total income. Based on this finding he directed the petitioner to pay back the amount of Rs. 837.37 being the refund given in the original order of assessment, within the time specified in the order. A copy of that order is Ext. P2.

(2.) The main submission made by counsel for the petitioner was that under S.147 of the Income Tax Act, 1961, the respondent can reopen a completed assessment only if he has reason to believe that by reason of omission or failure on the part of the assesses to make a return for any assessment year or to disclose fully or truly all the material facts necessary for his assessment for that year, the income chargeable to tax has escaped assessment for the year or notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, he has in consequence of the information in his possession, reason to believe that the income chargeable to tax has escaped assessment for any assessment year. The petitioner's counsel submitted that none of the ingredients which would confer jurisdiction on the respondent to invoke S.147 was present in the case and therefore Ext. P 1 notice and Ext. P 2 order were invalid. Counsel also submitted that there was no under assessment or an assessment at too low a rate or that the income chargeable to tax has been made the subject of excessive relief in order to attract the provisions of S.147. The only ground on which the order was sought to be justified by counsel for the Department was that the income chargeable to tax has been subjected to excessive relief, and therefore the Income Tax Officer was justified in issuing the notice and making the assessment. S.147 is as follows:

(3.) I think the principle of this ruling must apply to the facts of this case. The argument that the petitioner has an alternative remedy is not entitled to much weight, as on the facts admitted, the Income Tax Officer has no jurisdiction to proceed under S.147. I therefore hold that Ext. P 2 order was passed without jurisdiction. I quash Exts. P 1 and P 2. The writ petition is allowed. No costs.