Law:

Section:

Section 148 of the Income-tax Act, 1961 read with Article 226 of the Constitution of India - Income escaping assessment - Issue of notice for - Assessment year 1966-67 - Whether when Act provides a special machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper order passed by ITO, assessee could not be permitted to circumvent such normal remedy, and resort to extraordinary jurisdiction of High Court under article 226, to challenge notice issued under section 148 - Held, yes - Whether where ITO had recorded detailed reasons for initiating proceedings under section 147(a) and for issuing notice under section 148 and proceedings were initiated after obtaining requisite sanction from commissioner under section 151(2), it could not be said that condition pre-requisite for issue of notice under section 148 were not there - Held, yes FACTS During the accounting year relevant to the assessment year 1966-67, the official liquidator effected sales of capital assets of the company in liquidation, i.e., machinery, plants, etc. on 5/6-8-1965, under the order of the High Court. The ITO having come to know about the transfer of the capital assets of the company, issued a notice dated 24/25/-7-1967, under section 148, with a view to bring to tax in the hands of the assessee the income derived therefrom, requiring the official liquidator to file a return of the said income. In pursuance of the aforesaid notice, the official liquidator filed a return. In the section regarding capital gains, the income was shown as 'nil', although along with the return certain documents were filed giving details of the transfers effected by him. Based on the decision of a single Judge the assessee raised a preliminary objection to the jurisdiction of the ITO to issue a notice under section 148, on the ground that no such notice could be issued without the leave of the court as required by section 446 of the Companies Act, 1956. In consequence thereof, the ITO dropped the proceedings on 19-9-1969. Subsequently, the said order of the Single Judge was reversed by the Division Bench and the order of the Division Bench was confirmed by the Supreme…

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