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Issues involved: Reopening of assessment u/s 147(b) of the Income-tax Act, 1961 based on information obtained by the Income-tax Officer, validity of invoking provisions of section 147(b) of the Income-tax Act.
Summary: The High Court of Madras addressed two references concerning the assessment years 1968-69 and 1969-70, both involving a common legal question. The assessee, a cooperative society engaged in various activities including a salvage farm operation, had claimed a loss in the salvage farm which was initially allowed by the Income-tax Officer. Subsequently, during the assessment for the year 1970-71, it was discovered that there was an underassessment of the assessee's total income for the previous years. The Income-tax Officer then initiated action u/s 147(b) of the Income-tax Act, disallowing the previously allowed loss under the salvage farm operation based on the exemption under section 10(27) of the Act for income derived from certain activities. The Appellate Assistant Commissioner upheld the reassessment, leading to further appeals by the assessee before the Tribunal. The Tribunal justified the reopening of the assessment for the earlier years and remitted the question of the applicability of section 10(27) of the Act back to the Appellate Assistant Commissioner for further examination. The High Court considered the arguments put forth by both parties, emphasizing the necessity for the Income-tax Officer to have valid reasons and information before initiating proceedings u/s 147(b) of the Act. The Court highlighted the categories of cases under which such provisions could be invoked, including instances where information is obtained from the original assessment records. In this case, the Court found that the reassessment was not merely a change of opinion but was based on information discovered during the assessment for the subsequent year. The Court referred to relevant legal precedents to support its decision, ultimately concluding that the reopening of the assessment was justified under section 147(b) of the Act. The Court answered the legal question in the affirmative, ruling in favor of the Revenue and awarding costs accordingly.
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