Assistant Commissioner Of Income Tax vs Rajesh Jhaveri Stock Brokers Pvt. Ltd

3. Background facts in a nutshell are as follows:

4. The respondent-a Private Limited Company filed its return of income for Assessment year 2001-02 on 30th October, 2001 declaring total loss of Rs.2,70,85,105/-. The said return was processed under Section 143(1) of the Income Tax Act, 1961 (in short the Act) accepting the loss returned by the respondent. Notice under Section 148 of the Act was issued on the ground that claim of bad debts as expenditure was not acceptable. On 12th May, 2004 a return of income declaring the loss at the same figure, as declared in the original return, was filed by the respondent under protest. Copy of the reasons recorded was furnished by the appellant on the respondents request some time in November, 2004. The respondent raised various objections, both on jurisdiction and merits of the subject matter recorded in the reasons. On 4th February, 2005 the appellant disposed of the objections holding that the initiation of reassessment proceedings was valid and he had jurisdiction to undertake such an exercise. It is in the aforesaid backdrop of facts that the impugned notice under Section 148 of the Act dated 12th May, 2004 was challenged by the respondent.

6. In support of the appeal learned counsel for the appellant submitted that the factual position involved in Adani Exports case (supra) was entirely different. That was a case relating to Section 143 (3) of the Act and the present case relates to Section 143(1) of the Act. It is pointed out that return was filed by the respondent for the concerned assessment year i.e. 2001-2002 on 30.10.2001. The return was processed under Section 143 (1) of the Act on 26.11. 2001. The revenue audit raised an objection relating to a debit of Rs.1285.72 lakh as bad debt out of total expenditure of Rs.1307.64. Since the conditions stipulated under Section 36(1)(vii) read with Section 36(2) of the Act were not fulfilled, the assessing officer reopened the assessment by issuing a notice in terms of Section 148 of the Act on the ground that it has reason to believe that the income assessable to tax had escaped assessment within the meaning of Section 147 of the Act. The respondent asked for the reason for re-opening the assessment. On 31.5.2004 a return of income declaring the loss of the original return was filed by the respondent under protest and raised various objections relating to jurisdiction and merits of the subject matter. The same was disposed of by the assessing officer holding the initiation of re-assessment proceedings was valid and the assessing officer had jurisdiction to undertake the exercise. Thereafter a writ petition was filed as noted above. The High Court relying on the decision in Adani Exports case (supra), which had no application, allowed the writ petition.

(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.

(a) Where income chargeable to tax has been underassessed ; or

Explanation 2.Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of this section.