1997 (3) TMI 62 - HC - Income Tax

Assessing Officer, Assessment Proceedings, Doctrine Of Merger, Jurisdiction To Reassess, Liquor Business, Reassessment Proceedings

Summary

Issues Involved:
1. Validity of the notice issued under section 148 of the Income-tax Act, 1961.
2. Jurisdiction of the Assessing Officer to reassess income under section 147 after an intimation under section 143(1)(a).
3. Applicability of section 44AC in determining taxable income.
4. Merger of the intimation with the appellate order and its implications on reassessment proceedings.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the notice dated August 14, 1995, issued under section 148 of the Income-tax Act, 1961, seeking to reassess the income for the assessment year 1989-90. The Assessing Officer had issued the notice on the grounds that the income of Rs. 7,23,889 had escaped assessment. The court held that the profits to the tune of Rs. 7,23,880 were never assessed nor could they be assessed under the scheme of the Act. Therefore, the reassessment proceedings were not bad in law.

2. Jurisdiction of the Assessing Officer to Reassess Income Under Section 147:
The petitioner argued that since the Assessing Officer failed to issue a notice under section 143(2) within the stipulated time, he lost the jurisdiction to reassess under section 147. The court rejected this plea, stating that the failure to take steps under section 143(2) does not render the Assessing Officer powerless to initiate reassessment proceedings under section 147, provided the conditions of section 147 are satisfied.

3. Applicability of Section 44AC:
The Assessing Officer had applied section 44AC to compute the taxable income, which was contested by the petitioner. The appellate authority held that the adjustment made by the Assessing Officer under section 143(1)(a) was not justified as it involved debatable issues. The court upheld this view, stating that section 44AC could not be invoked under section 143(1)(a) as it was a highly debatable issue. The Supreme Court in the case of Union of India v. A. Sanyasi Rao [1996] 219 ITR 330 had upheld that profits from liquor business should be computed in accordance with sections 28 to 43C and not solely under section 44AC.

4. Merger of the Intimation with the Appellate Order:
The petitioner contended that the intimation issued under section 143(1)(a) had merged with the appellate order, thus precluding the Assessing Officer from initiating reassessment proceedings. The court clarified that there was no appeal against the intimation itself but against the order rejecting the rectification application under section 154. Therefore, the intimation did not merge with the appellate order, and the Assessing Officer was not estopped from initiating reassessment proceedings.

Conclusion:
The petition was dismissed, allowing the Assessing Officer to proceed with the reassessment under section 148. The court emphasized that the reassessment should be conducted purely on the merits, without being influenced by the observations made in the judgment.