Law:

Section:

Section 148, read with section 147(a) of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for - Assessment year 1960-61 - Whether recording of reasons is prerequisite to assumption of jurisdiction by ITO for initiating proceedings for assessing or reassessing income which has escaped assessment - Held, yes - Whether in order to justify action under section 147(a), it is not open to ITO to refer to reasons other than those recorded by him pursuant to section 148(2) - Held, yes FACTS The petitioner was a Hindu undivided family (HUF) and owned a residential house and a dal mill. It carried on the business of manufacturing dal and also earned income from speculation and commission agency. It was said that a partial partition of the business carried on by the petitioner was effected, but the residential house property and the dal mill were left intact in the ownership of the petitioner. The business so far carried on by the petitioner was apparently taken over by a partnership firm. The income from the business for the previous year relevant to the assessment year 1960-61 was assessed in the hands of the partnership firm, which was granted registration under section 26A of the Indian Income-tax Act, 1922. For the assessment year 1964-65, however, the partnership firm claimed a deduction of certain amount on account of rent paid by it to the petitioner for the hire of the dal mill, which had all along been employed by the partnership firm for the purpose of the business. The claim was disallowed by the ITO. The appeal filed before the AAC was dismissed by the AAC. On further appeal, the ITAT allowed the appeal. It held that the dal mill, which it referred to as the godown, had not been included in the partition and that the rent had been paid for its use by the partnership firm to the petitioner, and, therefore, the claim must be allowed. Thereafter, ITO applied to the Commissioner suggesting that the case might be carried in reference to the High Court or, in the alternative, proceedings under section 147 of the Income-tax Act, 1960, be initiated for the assessment year 1960-61. The Commissioner, it appeared, did not approve the former course…

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