THANGAM TEXTILES Vs. FIRST INCOME TAX OFFICER

JUDGEMENT

(1.) THIS is a petition for the issue of a writ of prohibition prohibiting the respondent from pursuing the reassessment proceedings in pursuance of the notice dated July 6, 1967, issued under Section 148 of the Income-tax Act, 1961 (hereinafter called " the Act"), in respect of the assessment year 1963-64. The petitioner, a firm of partnership, originally consisted of five partners. On April 24, 1963, one K. Ramaswami, a partner of the firm, retired and on December 26, 1963, M/s. Krishnaswami and Thiagarajan, two other partners of the firm, also retired. The partnership firm was continued by Perumalsarni and Uthamraj, the two remaining partners, up to January 3, 1965, on which date the firm was dissolved.

(2.) FOR the assessment year 1963-64, the petitioner filed a return of income and this return was accompanied by a statement of the auditor, containing the above facts relating to the partnership firm and also a statement that the deed of partnership was executed on December 27, 1963, between the two partners to continue the firm and the application for registration for 1964-65 was also filed on February 15, 1964. The petitioner was doing business in purchase, manufacture and export of cotton and art silk cloth to Ceylon and there were also some local sales. In the statement accompanying the return of income the petitioner admitted that the licences for import of art silk and dyes were disposed of but the profits were not brought into account. The petitioner however stated that for the reasons stated in the statement accompanying the return the income returned was only an estimate.

(3.) IN Narayanan Chetti v. INcome-tax Officer, . the Supreme Court held that the service of requisite notice on the assessee is a condition precedent to the validity of any reassessment made under Section 34 of the INcome-tax Act, 1922 (which corresponds to Section 147 of the INcome-tax Act, 1961), and if a valid notice was not issued as required, the proceeding taken by the INcome-tax Officer in pursuance of an invalid notice and consequent orders of reassessment passed by him would be void and inoperative. The learned counsel for the revenue submitted that this decision of the Supreme Court rested on the language of Section 34 and that the provisions of sections 147 and 148 had not made service of notice the foundation for the initiation of the reassessment proceedings. Section 34 of the INdian INcome-tax Act, 1922, required the INcome-tax Officer to "serve on the assessee .... a notice .... and may proceed to assess or reassess . . .." Because this section requires that notice to be served and then proceed to assess, the notice was considered to be the foundation for initiation of proceedings under Section 34. But, under Section 147 of the Act the existence of the reasons or the grounds as stated therein are not foundations for the initiation of the proceedings and the issue of the notice under Section 148 is a mere formality to be observed before a reassessment, so ran the argument for the revenue.