C I T JODHPUR vs. SHIV RATAN SONI

ITA/44/2004HC RajasthanRJHC01024313200328 March 2007Author: RAJESH BALIA,BHANWARU KHAN20 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the notices issued under Section 148 were not valid. The Court agreed with the Tribunal that the satisfaction of the Assessing Officer regarding the escapement of income for Assessment Year 1986-87 was not founded on any relevant material. The reasons recorded by the Assessing Officer did not establish a nexus with any existing material that could lead to the formation of a belief that income for Assessment Year 1986-87 had escaped assessment. The Court emphasized that the subjective satisfaction of the Assessing Officer, to be judged through the reasons recorded prior to issuing the notice, is crucial. The reasons provided were vague and appeared to be a borrowed satisfaction from the order passed under Section 132(5) for retaining seized assets, rather than an independent application of mind to material relevant to the specific assessment year. The Court also noted the unsatisfactory conduct of the Assessing Officer in maintaining records in a related assessment year, which weakened his credibility. The appeal was dismissed.

What were the facts?

This appeal by the Revenue challenges an order of the Income Tax Appellate Tribunal (ITAT) concerning Assessment Year 1986-87. A search was conducted on the assessee, engaged in money lending and goldsmithy, on November 18, 1988. Assets valued at Rs. 24,00,000 (business income), Rs. 3,73,000 (investment in house), and Rs. 1,50,000 (unaccounted marriage expenses) were found, totaling Rs. 29,23,000. The assessee surrendered this entire amount as income. An order under Section 132(5) was passed retaining seized assets. Subsequently, notices under Section 148 were issued for Assessment Years 1986-87, 1987-88, and 1988-89. The ITAT quashed these notices, finding the satisfaction of the Income Tax Officer regarding escapement of income to be vague and not based on existing material.

What were the issues?

1. Whether the notices issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 1986-87 are valid, considering the reasons recorded by the Assessing Officer for forming the belief of escapement of income. The Revenue contends that the Assessing Officer's satisfaction, based on the order under Section 132(5) and seized records, should be considered. They argue that the Court should examine all material in possession of the Assessing Officer, including details in the Section 132(5) order. The Assessee, as upheld by the Tribunal, argues that the satisfaction of the Assessing Officer for issuing notices under Section 148 was not his own but borrowed from the Section 132(5) order. The reasons recorded were vague, not founded on existing material, and lacked application of mind. The Tribunal found that the material cited in the reasons recorded did not connect to the Assessment Year 1986-87, and there was no indication of failure on the assessee's part to disclose income.

Which sections of the Income-tax Act were involved?

Section 132(4),Section 132(5),Section 147,Section 148

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR.

D.B. INCOME TAX APPEAL NO. 44/2004 Commissioner of Income Tax-II Vs. Shiv Ratan Soni Aaykar Bhawan, Jodhpur. Date of Order :: 28.03.2007 PRESENT HON'BLE MR JUSTICE RAJESH BALIA HON'BLE MR JUSTICE BHANWAROO KHAN Mr Sangeet Lodha, for the petitioner. Mr Anjay Kothari, for the respondent. BY THE COURT (PER HON'BLE JUSTICE R.BALIA): This appeal is directed against the order of Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur dated 26.5.2003 and relates to Assessment Year 1986-87. The order of the Tribunal is common deciding appeals arising out of Assessment Year 1986-87 to 1988-89. The brief facts giving rise to this appeal are that the assessee is engaged in the activity of money lending and gold smithy. A search was conducted in the premises of the assessee on 18.11.1988 and following assets/valuable articles were found :- a]- Business income :- Rs.24,00,000 (Including money lending and pawaing)

2 b]- Investment in house :- Rs. 3,73,000 c]- Unaccounted marriage :- Rs. 1,50,000 expenses ------------- Rs.29,23,000 ------------- Besides those, some papers were also found during the course

The order continues below.

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