Income-tax---

----Reassessment---Notice under S.148 to assessee---Reasons not recorded and proceedings dropped---Fresh notice under S.148 as partners introduced capital and there were also credits during relevant period---Matter required to be examined---Notice not without jurisdiction---Indian Income Tax Act, 1961, Ss. 147 & 148.

The petitioner, a registered firm, took certain excise contracts in auction held in February, 1984, and the working started from April 1, 1984. The Income-tax Officer issued a notice under section 148 of the Income Tax Act, 1961, on October 11, 1988, for the assessment year 1984-85, proposing to assess/reassess income which had escaped assessment. The notice was served on October 27, 1988, but no assessment was made within a period of one year as required under the Act. On September 10, 1993, another notice under section 148 for the same assessment year was issued. This notice was challenged by the petitioner on the ground that the earlier notice had not been concluded, therefore, the second notice could not have been issued:

Held, that when the earlier notice was issued without any basis and the Department had no option but to drop the proceeding., on January 15, 1991, the chapter was closed. The fresh notice which had been issued had nexus and the reasons were given in this notice. The partners of the firm had introduced capital and there were also credits during the period relevant to the assessment year 1984-85. It was a matter to be examined and the notice was not without jurisdiction. It was open to the petitioner to raise any legal objection before the Assessing Officer.

H. S. Shrivastava for Petitioner.

V. K. Tankha for Respondents.

JUDGMENT

The petitioner by this petition has prayed that the notice dated September 10, 1993 (Annexure 'P.4'), issued under section 148 read with section 147 of the Income Tax Act, 1961, may be quashed.

The brief facts giving rise to this petition arc that the petitioner is a registered firm and followed the financial year as the accounting year. The petitioner-firm took certain excise contracts in the auction held in February. 1984 and working of such contracts started from April 1, 1984. The petitioner filed the return of

income for the financial year 1984-85 relevant to the assessment year 1985-86. During the course of the assessment proceedings for that year, it was required to produce confirmation letters from the creditors giving their complete and detailed addresses, G.I.R. No. and the Income-tax Ward/Circle and mode of payment of the amounts. The petitioner submitted written explanations on September 26, 1988, and September 27, 1988, with confirmation letters of loan creditors. In the written explanations, it was explained that the partners have introduced the invested capital on February 5, 1984, prior to getting auction allotted in their names and apart from the capital of the partners, loans to the tune of Rs.15 lakhs were obtained from various parties whose confirmation letters with details of cheques and drafts by which the amounts were received, were filed. The Income-tax Officer issued a notice under section 148 of the Income-tax Act on October 11, 1988, proposing to assess and reassess the petitioner-firm for the said assessment year on the ground that the Income-tax Officer had reason to believe that the petitioner's income chargeable to tax for that year, had escaped assessment within the meaning of section 147 of the Income-tax Act. The notice was served on October 27, 1988, and no assessment was made in the reassessment proceedings commenced on October 11, 1988, within a period of one year, as required tinder the Act. Thereafter, on September 10, 1993, another notice under section 148 of the Income-tax Act for the same assessment year, was issued which has been placed on record as Annexure 'P4'. This notice is being sought to be challenged by the petitioner by this petition on the ground that the earlier notice has not been concluded, therefore, the second notice could not have been issued.

A reply has been filed by the respondents and the respondents have pointed out that the earlier notice which was issued, was without any proceedings available with the Department and they have invited our attention to the proceedings dated January 15, 1991, in which it has been recorded:

"As there was no business during the assessment year 1984-85 and no return also filed by the assessee in response to notice under section 148, the proceedings are hereby dropped. Reasons for issuing notice under section 148 are also not recorded and as such the notice under section 148 if issued was also wrong. After enquiry if it is found that action has to be taken in the case of the firm, the same may be taken if found necessary."

Therefore, it is submitted that the earlier notice which has been issued, must have been issued without any basis and no papers are available with the Department to show that any proceedings was drawn before issuing any notice. When such proceedings were not available and no reasons were made available on record; therefore, the Department has no option but to drop the proceedings on January 15, 1991, that means that the whole exercise of so-called issuing notice became futile and the chapter was closed. It is only fresh notice which has been issued-under section 148 read with section 147 of the Income-tax Act and now the proceedings are being taken up under this new notice issued on September 10, 1993, we are satisfied that the new notice which has been given has nexus and reasons are given in this notice; therefore, we are not inclined to interfere with this notice. The original note-sheets have been produced before us the reasons and it has been pointed out in the reply filed by the respondents that the partners of the firm have introduced capital to the tune of Rs.70 lakhs and there were also credits to the tune of Rs.15 lakhs during the period relevant to the assessment year 1984-85. Therefore, it is a matter which is required to be examined and we are of the opinion that the notice issued by the respondents is not without jurisdiction. Hence, this petition has no merit and the same is dismissed. However, it is open for the petitioner to raise any legal objection before the Assessing Officer and any observation made in the order, will not come in the way of the petitioner.

M.B.A./1867/FC???????????????????????????????????????????????????????????????????????????????? Petition dismissed.