2004 (8) TMI 42 - HC - Income Tax

Reopening of the assessment - Whether Tribunal was justified in law in taking the view that reopening of the assessment by the Income-tax Officer was not legal or permissible? - The Tribunal while allowing the appeal had held that after passing of the assessment order neither any information nor any fresh material was on record, which could have led the Income-tax Officer to form a belief that income has escaped assessment to tax. The Tribunal, therefore, annulled the reassessment proceedings. - Since the reopening of the assessment proceeding appears to be on the basis of a Division Bench decision of this court in the case of Madho Prasad, which has been subsequently overruled by the hon ble Supreme Court in the case of Shri Om Prakash, there is no infirmity in the order passed by the Tribunal.

Summary

Issues:
Reopening of assessment under section 147/148 of the Income-tax Act, 1961 for assessment year 1973-74 based on inclusion of spouse's income in the hands of the assessee under section 64(1)(i) of the Act.

Analysis:
The case involved a reference to the High Court regarding the legality of reopening the assessment for the assessment year 1973-74 under section 147/148 of the Income-tax Act, 1961. The Assessing Officer initiated proceedings due to the omission of including the income of the wife of the respondent-assessee, a partner in a firm, in the hands of the respondent-assessee under section 64 of the Act. The respondent-assessee objected to the reassessment, claiming double taxation and change of opinion. The Income-tax Officer proceeded with the reassessment, leading to an appeal by the assessee.

The Appellate Assistant Commissioner dismissed the appeal, citing the decision in the case of Madho Prasad v. CIT and presuming the reassessment under section 147(b) of the Act. The objection of change of opinion was rejected. The respondent-assessee then appealed to the Tribunal, which ruled in favor of the assessee, annulling the reassessment proceedings due to lack of new information or material post the original assessment order.

In the High Court, the Revenue argued that the reopening of the assessment was based on a decision subsequently overruled by the Supreme Court in the case of CIT v. Shri Om Prakash. The Supreme Court clarified the conditions for section 64(1) to apply, emphasizing the individual capacity of the husband/father as a partner in a firm. Given the overruling of the earlier decision relied upon for reassessment, the High Court upheld the Tribunal's decision, ruling in favor of the assessee against the Revenue.

Therefore, the High Court answered the question referred in the affirmative, in favor of the assessee, concluding that there was no infirmity in the Tribunal's decision. No costs were awarded in the matter.