Law:

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Section 148 of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for - Assessment year 1961-62 - Whether, where notice issued under section 148 with sanction of commissioner is challenged, only document to be looked into for determining validity of notice is report of ITO on basis of which sanction of Commissioner is obtained - Held, yes -Whether, therefore, where single judge, in writ proceedings challenging validity of notice under section 148, relied upon affidavit in opposition filed by ITO stating certain facts which did not find place in his report sent to Commissioner for obtaining sanction for initiating reassessment proceedings, finding of single judge on basis of said affidavit to effect that ITO had jurisdiction to issue notice, could not be upheld - Held, yes FACTS For the relevant assessment year, notice under section 148 was issued by the ITO with the sanction of the Commissioner of Income-tax. In the report submitted to the Commissioner for obtaining sanction it was stated by the ITO that he had reason to believe that the assessee, at the time of the original assessment, did not disclose fully and truly all material facts necessary for the assessment in respect of the sources of loans alleged to have been taken from hundi banker. On writ petition filed by the assessee challenging the validity of aforesaid notice the single judge relied upon the affidavit-in-opposition filed by the ITO and held that the Department had been able to show beyond doubt that the sufficient materials were before the ITO at the time he issued the notice and therefore, he had jurisdiction to issue the notice under section 148. On appeal, it was contended by the assessee that for the purpose of ascertaining the reason, the Court could only refer to the recorded reasons and for this purpose look into records. However, the Court could not take into consideration the averments made in the affidavit-in-opposition filed, which averments were not supported by the recorded reasons. HELD The trial judge erred in relying on the evidence (affidavits) of the ITO which contained averments which were not supported by the 'recorded reasons'. The only document to be…

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