1998 (7) TMI 80 - HC - Income Tax

Summary

Issues Involved:
1. Legality of supplementary assessments for the assessment years 1956-57, 1957-58, and 1958-59.
2. Powers of the Income-tax Officer to re-examine the validity of reassessment proceedings u/s 147(a) in fresh assessment proceedings.

Summary:

1. Legality of Supplementary Assessments:
The assessee, a partnership firm, challenged the legality of supplementary assessments made by the Income-tax Officer on September 30, 1974, for the assessment years 1956-57, 1957-58, and 1958-59. These assessments were initially completed under section 23(3) of the Indian Income-tax Act, 1922, and later reopened u/s 147(a) of the Income-tax Act, 1961, by issuing notices u/s 148. The reassessments included additions as income from undisclosed sources and disallowances of interest on hundi loans. The Appellate Assistant Commissioner upheld the legality of the proceedings initiated u/s 147(a) but set aside the reassessments for fresh computation after allowing the assessee to present evidence. The Income-tax Officer, upon reassessment, made the same additions and disallowances due to the assessee's failure to produce evidence.

2. Powers of the Income-tax Officer:
The primary issue was whether the Income-tax Officer could re-examine the validity of reassessment proceedings u/s 147(a) during fresh assessment proceedings. The Tribunal held that the Appellate Assistant Commissioner had already decided the legality of the reassessment proceedings in his order dated August 12, 1969, and it was not open to the assessee to challenge this again before the Income-tax Officer. The Tribunal observed that the assessee failed to produce evidence to prove the genuineness of the hundi loans, thus failing to discharge the burden of proof. Consequently, the Tribunal rejected the assessee's contention and upheld the Revenue's appeal, setting aside the order of the Appellate Assistant Commissioner.

Conclusion:
The High Court concluded that the Income-tax Officer and the Appellate Assistant Commissioner erred in re-examining the legality of the reassessment proceedings, which had already attained finality. The Tribunal's decision to reverse the Appellate Assistant Commissioner's order was upheld. The court answered the question in the negative, in favor of the Revenue and against the assessee, affirming that the assessee could not challenge the validity of the reassessment in the fresh assessment proceedings. The reference was disposed of with no order as to costs.