1998 (10) TMI 67 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses two main issues:
1. Validity of reassessment proceedings by the Income-tax Appellate Tribunal.
2. Consideration of interest on short-term bank deposits as assessee's income.

Issue 1: Validity of Reassessment Proceedings
The Supreme Court remanded the matter to the High Court to consider whether the reassessment proceedings were valid. The Income-tax Officer had reopened the assessment under section 147(b) of the Income-tax Act based on judgments of the Bombay High Court and Madras High Court. The Commissioner of Income-tax allowed the appeal filed by the assessee, but the Tribunal set aside the reassessment, stating that there was no information warranting reopening. The High Court held that the judgments of the Madras High Court were relevant and constituted information under section 147(b). The Tribunal's order referring to these judgments was dated after the original assessment, indicating the Income-tax Officer did not have this information at that time. Therefore, the High Court answered the question in the negative and in favor of the Revenue, affirming the validity of the reassessment proceedings.

Issue 2: Interest on Short-term Bank Deposits
The Supreme Court had already ruled in favor of the Revenue that interest on short-term bank deposits is assessable income under the Income-tax Act. The Income-tax Officer had not included this income in the original assessment, leading to the reassessment. The High Court considered whether the judgments of the Madras High Court were relevant in this context. The Madras High Court had held that interest earned on deposits is income from other sources and taxable. The High Court found this judgment relevant and admissible as information under section 147(b). The argument that the Income-tax Officer was bound by the Tribunal's orders was dismissed, as the Tribunal's order referring to the judgment was after the original assessment. Therefore, the High Court concluded that the interest on short-term bank deposits should be considered as the assessee's income, in line with the Supreme Court's decision.

In summary, the High Court upheld the validity of the reassessment proceedings under section 147(b) and confirmed that interest on short-term bank deposits is to be considered as the assessee's income, in accordance with relevant judicial decisions.