Delhi H.C : No reassessment u/s 147 on the basis of notification which is quashed already

High Court Of Delhi

Ultra Marine Air Aids (P.) Ltd. Vs. Inspecting Assistant Commissioner

Section : 35,147

Dipak Misra, CJ. And Sanjiv Khanna, J.

W.P. (C) No. 1232 Of 1987

January  7, 2011


1. Invoking the jurisdiction of this court under article 226 of the Constitution of India, the petitioner M/s. Ultra Marine Air Aids (P.) Ltd., has prayed for issue of a writ of certiorari for setting aside the notice under section 148 of the Income-tax Act, 1961 dated 28-1-1987 on many a ground.

2. Pursuant to the reassessment notice the petitioner filed its return of income and by its letter dated 11-4-1987 had asked for reasons for reopening of assessment. The reasons were communicated by the Assessing Officer in his letter dated 29-4-1987, which reads as under :

“2. You had been allowed deduction of Rs. 5 lakhs on account of donation made by you to M/s. K.M. Scientific Research Centre, Bombay. The Central Board of Direct Taxes vide Notification No. 6551 (F. No. 203/23/85-IT (Inv.) dated January 2, 1986, had withdrawn the approval to M/s. K.M. Scientific Research Centre, for the purpose of section 35(1)(ii), with effect from January 17, 1980.

3. In view of the above information, I had reason to believe that income chargeable to tax had escaped assessment and hence proceedings for reassessment had been initiated.

4. Notice under section 143(2) has already been issued to you in response to which you had attended my office on April 20, 1987 and April 28, 1987. Now the case is fixed for hearing on May 5, 1987.”

3. Mr. Prem Nath Monga, learned counsel for the petitioner has drawn our attention to annexure M, a notification dated 20-8-1981 by which K.M. Scientific Research Centre was accorded permission/approval under clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961. The said notification reads as under ([1982] 133 ITR (St.) 18) :

“Notification New Delhi, 20-8-1981 Income-tax

No. 4185 (F. No. 203/134/79-ITA.II) : In continuation of this office Notification No. 2739 (F. No. 203/197/78-ITA.II) dated 1-3-1979 it is hereby notified for general information that the Institution mentioned below has been approved by the Indian Council of Agricultural Research, the prescribed authority for the purposes of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961.


K.M. Scientific Research Centre, Masonda, Motinagar, Faizabad (U.P.)

This notification is effective for a period of 3 (three) year from 17-1-1980 to 16-1-1983.

(M.K. Pandey)

Deputy Secretary to the Government of India.”

4. Mr. Prem Nath Monga, learned counsel appearing for the petitioner-assessee has submitted that the initial notification contained in annexure M dated 20-8-1981 has been withdrawn by subsequent notification dated 2-1-1986 with retrospective effect from 17-1-1980. The factual position is not disputed by Ms. Rashmi Chopra, learned counsel for the Revenue-Department.

5. Mr. Prem Nath Monga, learned counsel appearing for the petitioner-assessee has submitted that the notification dated 2-1-1986 was challenged before the Allahabad High Court and a Division Bench of the Allahabad High Court in K.M. Scientific Research Centre v. Lakshman Prasad [1998] 229 ITR 23 has quashed the said notification. Learned counsel for the petitioner-assessee has also commended the decision of the Bombay High Court in Ramdas Maneklal Gandhi v. Union of India [2000] 241 ITR 437 / 108 Taxman 590 wherein the High Court of Bombay has held that the notification granting benefit cannot be retrospectively withdrawn.

6. As advised, at present, we are not referring to this decision of the Bombay High Court because the notification dated 2-1-1986 in the case at hand specifically related to K.M. Scientific Research Centre, which has been quashed by the Allahabad High Court. As the notification has been quashed and the same has not been assailed by the Revenue Department, the reasons for reopening the assessment under section 147/148 of the Income-tax Act, 1961, do not survive. The very basis and foundation for issue of reassessment notice have ceased to exist. Consequently, the writ petition is allowed and the notice issued vide annexure E dated 28-1-1987, is quashed. There shall be no order as to costs.

[Citation : 332 ITR 273]

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