1989 (9) TMI 17 - HC - Income Tax

Information That Income Has Escaped Assessment, Intercorporate Dividends, Reassessment, Relief From Income Tax

Summary

Issues Involved:

1. Whether the decision of the Appellate Assistant Commissioner for the year 1966-67 confirming the order of the Income-tax Officer constituted "information" under section 147(b) of the Income-tax Act for the assessment year 1965-66.
2. Whether the definition of 'average rate of tax' in section 2(10) of the Income-tax Act applies to the same expression used in section 85A.
3. Whether the average rate of tax in section 85A is the rate arrived at by dividing the total amount of income-tax chargeable on the total income as reduced by the amount of capital gains, by the total income as reduced by the amount of the capital gains.

Detailed Analysis:

Issue 1: Whether the decision of the Appellate Assistant Commissioner for the year 1966-67 confirming the order of the Income-tax Officer constituted "information" under section 147(b) of the Income-tax Act for the assessment year 1965-66.

The court considered whether an Appellate Assistant Commissioner's order could be regarded as "information" under section 147(b) of the Income-tax Act, 1961. The assessee argued that the Income-tax Officer had merely changed his opinion and that the Appellate Assistant Commissioner's order did not provide new information. The court referred to the Supreme Court's judgment in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996, which defined "information" as "instruction or knowledge derived from an external source concerning facts or particulars, or as to law, relating to a matter bearing on the assessment." The court concluded that an Appellate Assistant Commissioner, being a quasi-judicial authority, could provide information as to law within the meaning of section 147(b). The court held that the reassessment proceedings were properly reopened based on the Appellate Assistant Commissioner's order and answered the first question in the affirmative and in favor of the Revenue.

Issue 2: Whether the definition of 'average rate of tax' in section 2(10) of the Income-tax Act applies to the same expression used in section 85A.

Counsel for both parties agreed that this question should be answered in favor of the Revenue. The court referred to the judgment of a Full Bench in CIT v. Central Bank of India Ltd. [1990] 185 ITR 6, which had already settled this issue. Consequently, the court answered the second question in the affirmative and in favor of the Revenue.

Issue 3: Whether the average rate of tax in section 85A is the rate arrived at by dividing the total amount of income-tax chargeable on the total income as reduced by the amount of capital gains, by the total income as reduced by the amount of the capital gains.

Similarly, both parties agreed that this question should also be answered in favor of the Revenue, based on the same Full Bench judgment in CIT v. Central Bank of India Ltd. [1990] 185 ITR 6. The court answered the third question in the negative and in favor of the Revenue.

Conclusion:

The court concluded that the reassessment proceedings were validly initiated based on the information provided by the Appellate Assistant Commissioner's order. The court answered the first question in the affirmative, and the second and third questions were answered in favor of the Revenue based on prior judgments. There was no order as to costs.