1992 (1) TMI 65 - HC - Income Tax

Summary

Issues:
1. Justification of reopening assessment under section 147(a)
2. Applicability of section 41(1) to sales tax deduction

Analysis:

The judgment pertains to a reference order under section 256(1) of the Income-tax Act, 1961, made by the Income-tax Appellate Tribunal, Allahabad. The assessee had initially claimed a deduction of sales tax for the relevant assessment year, which was allowed. However, it was later discovered that the assessee had actually been exempted from sales tax by the sales tax authorities. Subsequently, the Income-tax Officer invoked section 147(a) of the Income-tax Act and added the amount deducted back into the assessee's income by invoking section 41(1) of the Act.

The first issue raised in the reference was whether the Appellate Tribunal was justified in holding that the reopening of the assessment under section 147(a) was justified. The court found that the assessee had deliberately concealed the fact of being exempt from sales tax, which amounted to a deliberate failure to disclose correct income. Therefore, the court upheld the invocation of section 147(a) by the Income-tax Officer, rejecting the argument that it should have been under section 147(b).

The second issue involved the applicability of section 41(1) to the sales tax deduction claimed by the assessee. The court referred to the provision of section 41(1) which deems any amount obtained subsequently in respect of a deduction made earlier to be chargeable to income tax. Consequently, the court held that the income-tax authorities were correct in adding back the amount deducted towards sales tax liability.

In conclusion, the court answered both questions in favor of the Revenue and against the assessee. The Revenue was awarded costs amounting to Rs. 250.