Law:

Section:

Section 148, read with sections 147 and 154 of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for - Assessment year 1972-73 - Whether prescription of recording of reasons in section 148(2) is mandatory and is an essential condition required to be fulfilled to vest jurisdiction in ITO to proceed to reopen an assessment under section 147 - Held, yes - Whether recording of reasons required under section 148 should not merely relate to reasons which led to belief that income had escaped assessment, but should also indicate existence of other ingredients of section 147 justifying reopening - Held, yes - Whether recording of reasons in proceedings under section 154 is not sufficient to sustain independent proceedings under section 148 - Held, yes - Whether any anterior note by officer in order sheet without any indication as to whether officer's attentions have been drawn to it is not sufficient for purpose of section 148(2) - Held, yes FACTS The assessee-company was carrying on the business in processing of cashew nuts. The original assessment for the assessment year in question was completed. Thereafter, the audit party made a note stating that the weighted deduction under section 35B and the development rebate allowed had certain mistakes. Thereupon, the ITO issued a notice under section 154, for rectification of mistakes, which was dropped later. Thereafter the ITO issued a notice under section 148 stating that he had reason to believe that income chargeable to tax for the assessment year in question had escaped assessment within the meaning of section 147 and called upon the assessee to file a return of his income. The assessee objected. But the assessment was made in accordance with the audit note, withdrawing the weighted deduction under section 35B on certain amounts originally allowed, and reducing the development rebate. The AAC allowed the assessee's claim and restored the benefits granted in the original order of assessment. The Tribunal held that the reasons had not been recorded within the meaning of the provisions of section 148(2) before issuing the notice under section 148 and the reopening of the assessment was, therefore,…

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