Notice issued without stating basis for assumption of jurisdiction u/s 147 and 148 is unsustainable

Milton Plastics Limited Vs Mudit Nagpal (Bombay High court)

Bombay High Court held that notice not setting out the material that provided the basis for assumption of jurisdiction u/s. 147 and 148 of the Income Tax Act is without jurisdiction and unsustainable in law.

Facts- By this writ petition invoking our jurisdiction under Article 226 of the Constitution of India, the Petitioner impugns Notice dated 22.03.2004 issued by the Respondent No.1 – Deputy Commissioner of Income Tax, Circle 2(2), Mumbai, u/s. 148 of the Income Tax Act, 1961 along with order dated 04.03.2005 dismissing the Petitioner’s objections to reopening of assessment for the Assessment Year 1997-98.

Conclusion- We conclude that the Petitioner had disclosed all material facts for the Assessment Year 1997-98 including the transactions now referred to in the impugned notice u/s. 148 of the Act. There was thus no foundational fact at all disclosed in the notice issued by the Respondent No.1 – Deputy Commissioner of Income Tax, Circle 2(2), Mumbai to assume jurisdiction to reopen the case of the Petitioner for Assessment Year 1997-98, more so to get over the bar of limitation of four years. The objections raised by the Petitioner in its reply dated 22.09.2004, that the reasons cited in the notice dated 22.03.2004 issued by the Respondent No.1 that the reopening was based upon a change of opinion without there being any sufficient cause for arriving at that conclusion is justified and correct. The reasons cited for rejection of the objections in the impugned order dated 04.03.2005, namely the reference to the specific transactions of sale and lease back for the Assessment Years 1996-97 and 1997-98 clearly do not constitute material to justify reopening of the assessment. As held in the judgments of this Court quoted above, the notice must stipulate that there was a failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment and discovery of such new material, details of which are required to set out in the notice could be the only material to form the basis for assuming jurisdiction u/s. 147 of the Act.

In the present case, there is clearly a failure on the part of the Assessing Officer to set out such material that provided the basis for assumption of jurisdiction u/s. 147 and 148 of the Act. Such material not being available in the notice, the impugned notice dated 22.03.2004 is clearly without jurisdiction and the same is unsustainable.

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