JUDGMENT
B.A. Khan J.
Petitioner firm is engaged in manufacture and sale of medicines. It filed its return for the asst. yr. 1984-85 declaring its taxable income at Rs. 91,640. Along with the return it filed all necessary documents including balance sheet, trading Ale,, P&L ale, depreciation statement etc. Upon this respondent ITO completed assessment proceedings and passed assessment order dt. 26th March, 1986, under s. 143(1) of IT Act. He, however, issued notice dt. 3rd March, 1989, for reopening of assessment for asst. yr. 1984-85, on the ground that he had reason to believe that income for this assessment year had escaped assessment.
2. Petitioner has challenged this on the ground that it was vague and uncertain and did not disclose any reason for the reopening of the assessment and that it had asked ITO vide letter dt. 17th April, 1989, to furnish reasons supporting the action but in vain. It is submitted that petitioner had discharged his duty to disclose fully and truly all material and primary facts related to his assessment of income and respondent ITO had passed an assessment order on due application of mind and on feeling satisfied about the declaration of income and as such he had no material before him on the basis of which he could form the belief that the income for the relevant assessment year had escaped assessment.
3. In other words, it is sought to be projected that he had wrongly assumed the jurisdiction without satisfying pre-conditions laid down in s. 147(a) of the Act and had proceeded in the matter in a mechanical manner. Alternatively, it is submitted that petitioner’s case was covered by the amnesty scheme and, therefore, respondents were bound to accept the income declared. It is also made out that the reasons sought to be advanced were not germane and promote to the underlying object of escapement of income and contemplated by s. 147(a) of the Act. Reliance for this is placed on ITO & Ors. vs. Lakhmani Mewal das 1976 CTR (SQ 220 : (1976) 103 ITR 437 (SQ , Indian Of Corpn. vs. ITO (1986) 58 CTR (SC) 83 .. (1986) 159 ITR 956 (SC) , (1981) 130 ITR 450 (sic).
4. It is well settled that ITO is required to satisfy two conditions laid down in s. 147(a) before he assumes jurisdiction to issue notice under s. 148 of the Act viz., (a) he must have reason to believe that income chargeable to tax had escaped assessment, and (b) he must have reason to believe that such income had escaped assessment by reason of omission or failure on the part of assessee (i) to make the return under s. 139, or (ii) to disclose fully and truly material facts necessary for the assessment for that year. Both these conditions must coe3dst to confer jurisdiction on ITO who is required to record reasons before initiating proceedings under s. 148(2). Similarly, under s. 147(a) of the Act, CIT should be satisfied on the reasons recorded by ITO that it was a fit case for issuance of notice. However, there is a corresponding duty cast on the assessee to make a true and full disclosure of primary facts at the time of original assessment.
5. It is also established that the notice issued under s. 148 of the Act should follow the reasons recorded by ITO for reopening of the assessment and such reasons must have a material bearing on the question of escapement of income by the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Whether such reasons are sufficient or not, is not a matter to be decided by the Court. But the satence of the behalf is subject to scrutiny if assessee shows circumstances that there was no material before the ITO to believe that the income had escaped assessment.
6. Given regard to all this, all that remains to be seen is whether respondent ITO had satisfied the requirements of s. 147 while issuing the impugned notice under s. 148 of the Act.
7. It is surprising that it should have taken respondents about nine years to file a reply to this petition and disclose some sketchy reasons to support the action, but even if their casual approach and inaction was overlooked, the impugned action could still not be justified. Because it was not far sure that the reasons projected by them in their belated reply were in fact the reasons which persuaded the then ITO to form the belief for reopening the assessment. Even if these projected reasons were taken on their face value, these may still not pass the test of being germane and having proximity with the escapement of income from assessment by the assessee.
8. Therefore, all things considered including the lapse of time and the default of respondents in not promptly replying this petition and in not disclosing the record before the Court to show if reasons were recorded by ITO in support of his belief before issuing the notice, it would be appropriate to let the impugned notice die its own death leaving respondents free to take future action, if any advised, strictly in conformity with requirement of ss. 147 and 148 of the Act.
9. This petition is accordingly partly allowed to that extent. The impugned notice is quashed. But this shah not come in the way of respondents to take fresh action in the matter, if permitted by law.