Law: Income Tax Act, 1961

Section: 147(a)

Income tax---Reassessment---Notice---Failure to disclose material facts necessary for assessment---General principles--Mines and quarries---Letter from Chief Mining Officer that colliery had been inspected and there had been under-reporting of coal raised---Reassessment proceedings based on letter---Valid---Indian Income Tax Act, 1961, S.147(a)---Constitution of India, Art. 226.--[ITO v. Selected Dalurband Coal CO. (Pvt.) Ltd. (1978) 113 ITR 489 reversed]. The notice under section 148 read with section 147(a) of the Income Tax Act, 1961, can be issued only where the Income Tax Officer has reason to believe that the income, profits and gains chargeable to tax had been under assessed or escaped assessment and further that such escapement or under-assessment was occasioned by reason of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment of the year. In other words, there must be relevant material before the Assessing Officer upon which he must reasonably and rationally form the requisite belief. The formation of belief by the Income Tax Officer is essentially within his subjective satisfaction. At the stage of issue of notice the only question is, whether there was relevant material on which a reasonable person could have formed the requisite belief. Against notices under section 147(a) of the Income Tax Act, 1961, issued to the respondent on the basis of a letter from the Chief Mining Officer showing that a joint inspection was conducted in the colliery of the respondent ¬assessee on January 9, 1967, by the officers of the Mining Department in the presence of the representatives of the respondent-assessee and that according to the opinion of the officers of the Mining Department there was under-reporting of the raising figure to the extent indicated in the said letter, the respondent filed a writ petition. The Calcutta High Court held the notices invalid. On appeal to the Supreme Court by the Department: Held, allowing the appeal, that the report was made by a Government Department after conducting a joint inspection. It gave a reasonably specific estimate of the excessive coal mining said to have been done .by…

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