SUPREME COURT OF INDIA

Before:- B.N. Kirpal and S. Rajendra Babu, JJ.

CA 837 and 838/1999. D/d. 12.2.1999.

Income-Tax Officer - Petitioner

Versus

Saradbhai M. Lakhani And Anr. - Respondent

Income Tax Act, 1961, Sections 148 and 147(b) - Notice issued under Section 148 against erstwhile partners of dissolved firm for re-opning assessment - AY 1988-89 - Such notice did not mention legal information forming its basis - Effect - Held - Information received by ITO was the decision of Gujarat High Court in Banyan and Berry case (1991)2 SCC 558 - When ITO became aware of this decision he could initiate proceedings under Section 147(b).

[Para 7]

Cases Referred :-

A L. A. Firm v. Commissioner Income Tax.

Banyan and Berry v. Commissioner Income Tax.

JUDGMENT

B.N. Kirpal, J. - Special leave granted.

2. Heard the learned Attorney-General for the appellant.

3. This is an appeal against the judgment of the Gujarat High Court which had allowed a writ petition filed by the respondent who had challenged the notice issued under Section 148 of the Income-tax Act, 1961, whereby the respondent's assessment in respect of the year 1988-89 was sought to be reopened.

4. The reason for reopening of the assessment was that the Gujarat High Court in Banyan and Berry v. Commissioner Income Tax , had held that after dissolution of the partnership firm, the assessment could be only in the hands of the erstwhile partners.

5. The income was computed on the basis of the award of the arbitrator in favour of the firm. The amount received was apportioned amongst the partners and it is on this basis that the income was sought to be assessed in the hands of the partners.

6. The High Court quashed the notice under Section 148 by observing that in the absence of mention of the judgment of the Gujarat High Court in Banyan and Berry's case , it was not open to the Income-tax Officer to justify the order by reference to the said decision.

7. It is evident that the aforesaid view of the High Court is not correct. This court has held that on the basis of the information which is received by the Income-tax Officer, reassessment proceedings can be initiated. The information which was received by the Income-tax Officer was the decision of the Gujarat High Court in Banyan and Berry's case . When the Income-tax Officer became aware of this decision, he could initiate the proceedings under Section 147(b) as has been held by this court in A L. A. Firm v. Commissioner Income Tax .

8. For the aforesaid reasons, we hold that the High Court was not right in allowing the writ petition filed by the respondent. Accordingly, the appeals are allowed and the judgment of the High Court is set aside the effect of which would be that the writ petition filed by the respondent would stand dismissed.

9. No order as to costs.

Appeals Allowed.