1998 (10) TMI 28 - HC - Income Tax

Issues Involved:
1. Validity of reassessment and limitation period.
2. Opportunity to the assessee to present its case.
3. Reliance on the Audit Bureau of Circulation certificate.
4. Inclusion of Rs. 2,25,200 in the assessed income.

Detailed Analysis:

Issue 1: Validity of Reassessment and Limitation Period
The assessee challenged the reopening of the assessment on the grounds of limitation, arguing that the proceedings were not completed within four years from the end of the assessment year in which the notice under section 148 was served. The notice was served on October 29, 1969, and the period of limitation would end on April 1, 1974. The assessee contended that the Explanation to section 153 of the Act was inapplicable. The court held that section 153 deals with the time limit for completion of assessments and reassessments, and the Explanation applies to the entire section. The period during which the assessment proceeding is stayed by an order or injunction of any court shall be excluded. The court emphasized that no party shall be allowed to take advantage of its own wrong. The period during which the stay was operative should be excluded while computing the period of limitation. Therefore, the reassessment completed on April 22, 1977, was within the time prescribed under section 153 of the Act.

Issue 2: Opportunity to the Assessee to Present Its Case
The assessee argued that the Income-tax Officer failed to give a reasonable opportunity to present its case, rendering the proceedings vitiated. The court noted that the notice under section 148 had been served on October 29, 1969, and the assessee did not file any return in response, even after the dismissal of its writ petition in 1972. The Income-tax Officer had called upon the assessee by a letter dated March 14, 1977, to file the overdue return, but the assessee remained silent. The court held that the assessee had ample opportunity to file the return and seek clarification from the assessing authority. The conduct of the assessee showed that it chose to remain silent, and it was not open to the assessee to now complain about the lack of opportunity.

Issue 3: Reliance on the Audit Bureau of Circulation Certificate
The assessee contended that the material gathered by the Assessing Officer, specifically the certificate from the Audit Bureau of Circulation, had not been disclosed. The court found that the reopening was based on the certificate, which set out the sales of newspapers published by the assessee. The court had declined to grant relief in respect of the notice issued for the assessment year 1957-58, indicating prima facie material to warrant the reopening of the assessment. The court held that the reliance on the certificate issued by the Audit Bureau was not arbitrary or whimsical. The assessee did not challenge the competence or reliability of the certificate and failed to file a return to demonstrate that there was no deficiency in the reported income.

Issue 4: Inclusion of Rs. 2,25,200 in the Assessed Income
The assessee argued that the sum of Rs. 2,25,200, shown as a deposit from the Youngmen's Tamilian Association, was wrongly included in the assessed income. The original assessment had treated it as a deposit. The court noted that the proposal to reopen the assessment was not on the ground that the sum had been wrongly treated as a deposit. The notice issued was under section 147(a), and there was no notice under section 147(b). The court held that if the sum was to be regarded as part of the assessee's income, it could only be dealt with under section 147(b), which was barred by time. Therefore, the inclusion of Rs. 2,25,200 was not justified.

Judgment Summary:
The court answered the questions as follows:
1. The reassessment was validly done.
2. The interpretation of the High Court's order by the Tribunal was correct.
3. The reassessment made on April 22, 1977, was within the time prescribed under section 153(2) of the Act.
4. The general definition of the term "assessment" under section 2(8) would apply.
5. Explanation 1(ii) to section 153 applies to reassessment proceedings.
6. The reassessment proceedings and the reassessment made by the Income-tax Officer were valid.
7. The assessee had not established with specific details that the difference in balance was due to the difference in the mode of accounting.
8. The addition made by the Income-tax Officer was partly valid, with Rs. 2,25,200 to be deleted.
9. The reassessment made on April 22, 1977, was valid in law, with the exception of the sum of Rs. 2,25,200.

Each party was to bear its own respective costs. The court corrected clerical errors in the questions of law referred to it.

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