Law: Income Tax Act, 1961

Section: 147,32,32AB,80,80HHC

Income-tax--Reassessment---Extended period of limitation---Condition precedent for availing of---Notice must record belief that income escaped assessment on account of assessee's failure to disclose material facts---Notice issued on ground Modvat adjustment not shown as income---Not failure to disclose facts--Notice invalid---Indian Income Tax Act, 1961, S.147. (b) Writ--- ---- Error of jurisdiction---Can be corrected by Court---Constitution of India, Art. 226. Mere escape of income is insufficient to justify the initiation of action under section 147 of the Income Tax Act, 1961, after the expiry of four years from the end of the assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. Unless the condition in the proviso to section 147 of the Income Tax Act, 1061, is satisfied, the Assessing Officer does not acquire jurisdiction to initiate any proceeding under section 147 of the Act after the expiry of four years from the end of the assessment year. Thus, in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate the notice and the entire proceedings. If the Assessing Officer chooses to entertain the belief that the assessment has been made in the background of the assessee's failure to disclose truly and fully all material facts, it is necessary for him to record that fact. A notice issued without recording such a fact cannot be regarded as valid notice: If the details placed by the assessee before the Assessing Officer were in conformity with the requirements of all applicable laws and known accounting principles, and material details had been exhibited before the Assessing Officer, it is for the Assessing Officer to reach such conclusions as he considered warranted from such data and any failure on his part to do so cannot be…

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