JAMNA LAL KABRA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner is a Hindu undivided family consisting of two members, Jumna Lal and Gopal Rai, Jumna Lal being the karta of the family. THE petitioner owned a residential house and a dal mill at Kalibari. It carried on the business of manufacturing dal and also earned income from speculation and commission agency. On April 16, 1959, the last date of the Ram Naumi year, relevant to the assessment year 1959-60, it is said that a partial partition of the business carried on by the petitioner was effected, the residential house property and the dal mill at Kalibari were left intact in the ownership of the petitioner. THE business so far carried on by the petitioner was apparently taken over by a partnership firm, Messrs. Jumna Lal Gopal Rai. THE income from the business for the previous relevant to the assessment year 1960-61 was assessed in the hands of the partnership firm, which was granted registration under section 26A of the Indian Income-tax Act, 1922. Similar assessments were made on the partnership firm for the assessment years 1961-62 to 1964-65. For the assessment year 1964-65, however, the partnership firm claimed a deduction of Rs. 3,000 on account of rent paid by it to the petitioner for the hire of the dal mill, which had all along been employed by the partnership firm for the purpose of the business. THE claim was disallowed by the Income-tax Officer. THE petitioner appealed, but the appeal was dismissed by the Appellate Assistant Commissioner. THE Appellate Assistance Commissioner took the view that as the assets of the business partitioned in part, it must be taken that all the assets of the business including the dal mill had been divided, and therefore the claim to deduction was not permissible. THE petitioner then proceeded in appeal to the Income-tax Appellate Tribunal. THE Appellate Tribunal allowed the appeal. It held that the dal mill, which is referred to as the Kalibari godown, had not included in the partition and that the rent had been paid for its use by the partnership firm to the petitioner, and, therefore the claim must be allowed. THEreafter it seems that the Income-tax èOfficer applied to the Commissioner of Income-tax suggesting that the case may be carried in reference to this court or , in the alternative, proceedings under section 147 of the Income-tax Act 1960, be initiated for the assessment year 1960-61. THE Commissioner, it appears, did not approve the former course and instead expressed his satisfaction of the reasons recorded by the Income-tax Officer that it was a fit case for the issue of a notice under section 148 . Accordingly, the Income-tax Officer issued a noticed dated February 24, 1966, under section 148 to the petitioner stating that he had reason to believe that the petitioners income chargeable to tax for the assessment year 1960-61 had escaped assessment, that he proposed to reasses the income for that assessment year, and he called upon the petitioner to furnish a return of its income assessable for that year. It was also stated that the notice was being issued after obtaining the satisfaction of the Commissioner. THEreafter, assessment proceedings pursuant to that notice were commenced by the Income-tax Officer. THE petitioner applies for certiorari against the notice under section 148 and for prohibition against further assessment proceedings pursuant to that notice.

(2.) SECTION 147 of the Income-tax Act, 1961, contemplates two distinct classes of cases in which the Income-tax Officer may take proceedings to assess or reassess income chargeable to tax which has escaped assessment. One class of cases is that falling under clause (a) where the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for assessment for that year, income chargeable to tax has escaped assessment for that year. The other class is contemplated by clause (b) where notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has, in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment for an assessment year. Before proceeding to make the assessment or reassessment under section 147 , the Income-tax Officer is required by section 148 to serve a notice on the assessee . Sub-section (2) of section 148 obliges the Income-tax Officer before issuing any notice under the section to record his reasons for doing so. Now no notice can be issued by the Income-tax Officer unless, as required by section 151 , the Board is satisfied that it is a fit case for issue of such notice in a case where notice has to be issued after the expiry of eight years from the end of the relevant assessment year, and in a case where notice has to be issued after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied that it is a fit case for issue of such notice. But whether it is the Board or the Commissioner, the satisfaction must proceed on the reasons recorded by the Income-tax Officer.

(3.) THE petition is allowed. THE notice dated February 24, 1966, issued under section 148 of the Income-tax Act, 1961, and the proceedings taken pursuant thereto are quashed. THE petitioner is entitled to its costs.