ADITYA MILLS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) IN this writ petition under Article 226 of the Constitution of INdia, the petitioner has challenged the notice dated April 22, 1978, under Section 147 of the INcome-tax Act, 1961, on the ground that no reason has been recorded as contemplated under Section 148 and the said reasons are arbitrary, illusory and fanciful.

(2.) THE facts of the case are that after initiation of the proceedings under Section 147, the petitioner received a letter dated September 1, 1982, from which it transpires that reopening of the proceedings is sought on the basis of the amount of commission which was paid to its sole-selling agent. It is submitted that the said amount is disclosed in the balance-sheet which was submitted to the assessing authority in the course of the assessment proceedings. It was further submitted by learned counsel that the material facts which were necessary having already been disclosed, the action of the Income-tax Officer is entirely illegal and arbitrary. THE payment of the said commission to the sole selling agent has always been allowed from the years 1969-70 to 1975-76 and as such the action being without jurisdiction, it has been prayed that the notice dated April 22, 1978, may be quashed and the respondents be restrained from proceeding further in consequence of the said notice.

(3.) FROM a perusal of the provisions of Section 147(a), it is evident that the Income-tax Officer must have reason to believe that the income had escaped assessment, (i) The belief must be in good faith and reasonableness and it cannot be a mere pretence. It should not be a pure subjective satisfaction of the Income-tax Officer ; (ii) the reasons for such belief should be recorded so that it could be considered that there was material in possession of the Income-tax Officer to form such opinion or belief ; (iii) escapement must be on account of omission on the part of the assessee ; (iv) failure on the part of the assessee should be to disclose fully and truly all material facts necessary for assessment ; (v) the sanction of the appropriate authority in accordance with the provisions of Section 151 has to be obtained before initiation of the proceedings ; and (vi) the notice must be issued within the time-limit prescribed under Section 149 read with Section 150.