SINGH, CJ. - (1.) THIS appeal is directed against the order of the learned Single Judge dated March 16, 2004 rendered in S. B. Civil Writ Petition No. 6962 of 2003, whereby the writ petition was allowed and the notice issued under Section 148 of the Income Tax Act, 1961 by the Assessing Authority was quashed. The facts giving rise to the appeal are as follows :
(2.) THE respondent company filed its return of income for the assessment year 1996-97 on November 28, 1996. THE assessment was completed by the Assessing Authority by its order dated February 26, 1999. However, on March 28, 2003, the Assessing Authority issued a notice to the respondent under Section 148 of the Income Tax Act requiring the respondent to deliver to it (Assessing Authority) within 30 days from the date of service of the notice a return in the prescribed form on the ground that it has reason to believe that the income of the respondent chargeable for the assessment year 1996-97 had escaped assessment. Pursuant to the notice issued under Section 148, the respondent filed a fresh return of income on March 28, 2003 before the Assessing Authority. THEreafter, the respondent on March 31, 2003 wrote a letter to the Assessing Authority requesting it to convey the reasons on the basis of which it had formed an opinion that the income of the respondent chargeable for the assessment year 1996- 97 had escaped assessment. Not receiving any response from the Assessing Authority, the respondent on November 29, 2003 again wrote a letter to it requesting it to furnish the reasons. It appears that the communication had the desired effect as the reasons for reopening the assessment were furnished to the respondent by the Assessing Authority by its letter dated December 5, 2003. THE letter dated December 5, 2003 reads as follows : " It is noticed that the assessee has claimed lease rent on accrual basis. On examination of the account it revealed that the claim represented principle amount and interest. THE principle amount has not been allowed in the assessment as it represented the cost of machinery during the year i. e. A. Y. 1996-97 the lease rent on accrued basis has been shown at Rs. 92,77,532/ -. In this claim also at lease Rs. 60,00,000 (approx) represented the principle amount towards the cost of the machinery. THErefore, because of wrong claim, the income chargeable to tax approx. 60,00,000/- has escaped assessment. " Pursuant to the notice, the respondent raised objections by means of replies dated December 10, 2003 & December 18, 2003. THE Assessing Authority, however, through its letter dated January 12, 2004 rejected the objections raised by the respondent. Thereafter, the respondent-company filed a writ petition on February 21, 2004 inter alia on the ground that the Assessing Authority had no jurisdiction to re-open the assessment under Section 147 by issuing notice under Section 148, after four years from the end of the relevant assessment year and there was no failure on the part of the respondent to disclose fully and truly all material facts necessary for its assessment for the year in question. The learned Single Judge was of the view that there was no satisfaction on the part of the Assessing Authority that the escapement of income chargeable to tax was on account of failure on the part of the assessee to file return disclosing fully and truly all material facts for the assessment year 1996-97 and, therefore, the period of limitation under Section 149 (1) (b) of the Income Tax Act, read with Section 147 thereof was not extendable beyond four years from the date of the end of the relevant assessment year. In this view of the matter, the learned Single Judge allowed the writ petition and quashed the impugned notice issued under Section 148 of the Income Tax Act. The appellants aggrieved by the decision of the learned Single Judge, have preferred the instant appeal. We have heard the learned counsel for the parties. The learned counsel for appellants submitted that the Assessing Authority had reason to believe that the respondent had omitted and failed to disclose fully & truly all material facts necessary for assessment relating to assessment year 1996-97. He contended that this was reflected by the communications of the Assessing Authority dated December 05, 2003 & January 12, 2004. Therefore, according to him, the Assessing Authority was justified in issuing notice to the respondent under Section 148 of the Income Tax Act and the impugned order of the learned Single Judge quashing the notice was not sustainable in law. On the other hand, the learned counsel for the respondent submitted that the Assessing Authority issued the aforesaid notice under Section 148 of the Income Tax Act after a period of four years from the date of the end of the relevant assessment year and, therefore, in order to take the advantage of Section 149 (1) (b) of the Income Tax Act, which stretches the period of limitation beyond four years, it must be demonstrated from the reasons for issuance of the notice that the Assessing Authority was satisfied that the assessee had omitted or failed to disclose fully & truly all material facts necessary for assessment. According to the learned counsel, the Assessing Authority without having reason to believe that on account of the failure on the part of the assessee to disclose fully & truly all the material facts necessary for assessment, issued the notice under Section 148 of the Income Tax Act after the period of four years from the date of the end of the relevant assessment year 1996-97, which it was not competent to do. As per the learned counsel for the respondent the Company had made full and true disclosure of the material facts in its return and, therefore, the assessing authority was not right in issuing notice under Section 148 of the Income-tax Act.
(3.) WE have considered the submissions of the learned counsel for the parties. The legal position on the subject is well- settled. The Assessing Authority has jurisdiction to reopen the assessment under Section 147 by issuing notice under Section 148 of the Income Tax Act, after four years from the end of the relevant year, in case the Assessing Authority has reason to believe that on account of omission or failure on the part of the assessee to file the return or on account of failure on his part to disclose fully & truly all material facts necessary for assessment for that particular year, income had escaped assessment. In Sri Krishna Pvt. Ltd. , etc. vs. Income-tax Officer and Ors. (1), the Supreme Court held that the assessing authority can issue notice under Section 148 of the Income-tax Act to the assessee, where it has reason to believe that on account of either the omission or failure on the part of the assessee to file the return or on account of the omission or failure on his part to disclose fully and truly all material facts necessary for his assessment for a particular year, income has escaped assessment. In Rakesh Agarwal vs. Assistant Commissioner of Income-tax (2), the Delhi High Court declined to interfere with proceedings initiated by the Income Tax Officer under Section 147 of the Income Tax Act by issuing notice under Section 148 thereof. In that case the material for assessment lay embedded in the record which was furnished by the assessee and it could be discerned only by careful and deep scrutiny of the same and, therefore, the belief of the Assessing Authority that the assessee had not disclosed material facts truly and fully in his assessment was not faulted by the Delhi High Court. ;