1997 (11) TMI 10 - HC - Income Tax

Summary

Issues Involved:
1. Validity of reassessment u/s 147(b) for the asst. yr. 1974-75.
2. Applicability of r. 115 of the IT Rules, 1962.
3. Necessity of notice u/s 163 for treating the assessee as an agent.
4. Time-barred nature of reassessment u/s 147(b) in view of s. 149(3).
5. Applicability of the decision in Indian & Eastern Newspaper Society vs. CIT.

Summary:

Issue 1: Validity of reassessment u/s 147(b) for the asst. yr. 1974-75
The Tribunal held that the reassessment made under s. 147(b) was invalid as the provisions of s. 147 do not apply to a summary assessment made under s. 172 of the Act. The reassessment was also found to be time-barred under s. 149(3). The High Court affirmed this view, stating that the ITO should have issued a notice u/s 163 before treating the assessee as an agent of the non-resident principal.

Issue 2: Applicability of r. 115 of the IT Rules, 1962
The Tribunal concluded that r. 115 of the IT Rules, 1962, was not applicable as the income was not expressed in foreign currency. The High Court upheld this finding, noting that the provisions of r. 115 are mandatory only when the foreign exchange is not brought to India.

Issue 3: Necessity of notice u/s 163 for treating the assessee as an agent
The Tribunal and the High Court both held that a notice u/s 163 is mandatory before treating the assessee as an agent of the non-resident principal. The High Court emphasized that the assessee filed the return under s. 172(3) as an agent of the master of the ship, not the non-resident principal.

Issue 4: Time-barred nature of reassessment u/s 147(b) in view of s. 149(3)
The Tribunal found the reassessment to be time-barred as the notice u/s 148 was issued after the expiry of the period specified in s. 149(3). The High Court agreed, noting that the original assessment was for the asst. yr. 1974-75, and the notice for reassessment was issued beyond the permissible time limit.

Issue 5: Applicability of the decision in Indian & Eastern Newspaper Society vs. CIT
The Tribunal held that the decision in Indian & Eastern Newspaper Society vs. CIT applied, making the reopening of the assessment invalid. The High Court did not provide a separate answer to this issue, as the answers to issues 3 and 4 rendered it unnecessary.

Final Judgment:
- Questions of law 3 and 4 were answered in the affirmative and against the Revenue.
- No answers were provided for questions 1, 2, and 5 due to the conclusions on questions 3 and 4.
- No order as to costs.