1997 (6) TMI 10 - HC - Income Tax

Summary

Issues Involved
1. Justification of the revised assessment under section 35 for the year 1974-75.
2. Availability of the quantum of suppression in the hands of the assessing authority at the time of the original assessment.

Detailed Analysis

Issue 1: Justification of the Revised Assessment under Section 35 for the Year 1974-75
The primary issue was whether the Agricultural Income-tax Appellate Tribunal was justified in its findings that the revised assessment made under section 35 for the year 1974-75 was not in order. The court examined the scope of section 35 of the Kerala Agricultural Income-tax Act, 1950, which allows the Agricultural Income-tax Officer to reassess income if it has escaped assessment for any reason within five years of the end of the financial year.

The assessee, a registered firm, had initially returned a total income of Rs. 69,923 for the assessment year 1974-75. However, an inspection conducted by the Intelligence Officer revealed heavy suppression and serious inflation of expenses, leading to a revised total income of Rs. 2,24,939. The assessing authority later reopened the assessment under section 35, citing that the value of 2,748.9 kgs. of rubber amounting to Rs. 14,294.28 had escaped assessment.

The Tribunal had accepted the assessee's contention that the reopening was unjustified as the information regarding the escaped income was already available at the time of the original assessment. However, the court referred to several precedents, including decisions from the Kerala High Court and the Supreme Court, which clarified that the reason for the escape of income is immaterial. The assessing authority is empowered to reassess income if it has escaped assessment for any reason.

The court concluded that the assessing authority correctly exercised its jurisdiction under section 35, emphasizing that even if the information was available during the original assessment but was not considered, the initiation of proceedings under section 35 would still be justified.

Issue 2: Availability of the Quantum of Suppression in the Hands of the Assessing Authority at the Time of Original Assessment
The second issue was whether the quantum of suppression made by the assessee was in the hands of the assessing authority at the time of the original assessment. The Tribunal had ruled in favor of the assessee, stating that the assessing authority had all the necessary information during the original assessment but failed to consider it.

The court, however, found this reasoning to be flawed based on the legal precedents. It was irrelevant whether the information was available at the time of the original assessment or not. The court referred to the Supreme Court's observation that the information leading to the belief that income has escaped assessment could be derived from the assessment records themselves.

The court emphasized that the wide and comprehensive language of section 35 allows reassessment if income has escaped assessment for any reason, thus making the Tribunal's findings incorrect.

Conclusion
The court answered question No. 1 in the negative, in favor of the Revenue, and against the assessee, holding that the revised assessment made under section 35 for the year 1974-75 was justified. The court declined to answer question No. 2, deeming it irrelevant to the determination of the case.

A copy of the judgment was ordered to be forwarded to the Agricultural Income-tax Appellate Tribunal, Additional Bench, Kottayam.