Law: Income Tax Act, 1961

Section: 148,147,2(47)

Law: Transfer of Property Act, 1882

Section: 53A

(a) Income-tax--- ----Reassessment---General principles---Information that income had escaped assessment---Transaction relating to property entered into in 1967 and 1982--­Suspicion that capital gain arising as a result of the transactions may have escaped---Reassessment proceedings in respect of assessment year 1988-89--­Not valid---Indian Income Tax Act, 1961, Ss.147(b) & 148---Constitution of India, Art.226. The assessee-company which owned a plot of land with structures thereon, entered into an agreement of lease in 1967. There was a further agreement in 1982 under which the assessee agreed to sell its reversionary rights in the property. Notice was issued in respect of the assessment year 1988-89 in 1990, on the ground that capital gains arose to the assessee as a result of the transaction. The second transaction on the basis of which the notice, was issued was one of a loan on which no interest had been charged. The Income-tax. Officer contended that the assessee should have received approximately Rs.3 lakhs if interest had been charged and hence this sum of Rs3 lakhs had escaped assessment. On a writ petition to quash the notice: Held, that, in the present cage, looking to the dates when the above transactions, namely, agreements, dated April 3, 1967, and April 1, 1982, took place, apart from mere suspicion, there was no material at all before the Assessing Officer which would give him reason to believe that any capital gains arose in the assessment year 1988-89 which escaped assessment. It was an accepted position that the assessee had in fact not received any interest on the loan. Hence, the notice issued under section 148 was without jurisdiction and was liable to be quashed. (b) Income-tax-- ----Reassessment---Writ---Writ can issue to quash reassessment proceedings initiated without jurisdiction---Indian Income Tax Act, 1961, Ss.147 & 148-----­Constitution of India, Art.226. The High Court exercising jurisdiction under Article 226 of the Constitution of India has power to set aside a notice under section 147(b) of the Income Tax Act, 1961, if the condition precedent for the exercise of jurisdiction under that section does not exist. (c)…

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