1985 (4) TMI 20 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Income-tax Officer's jurisdiction in initiating proceedings for reopening the assessment u/s 147(a) of the Income-tax Act, 1961.
2. Justification of treating a registered firm as a benami concern of an individual who was not a partner of that firm.

Summary:

Issue 1: Validity of Reopening Assessment u/s 147(a)
The court examined whether the Income-tax Officer validly assumed jurisdiction in initiating proceedings for reopening the assessment u/s 147(a) of the Income-tax Act, 1961. The assessee contended that the reopening should have been u/s 147(b) as it was based on information received from another Income-tax Officer. However, the court held that since the assessee had not disclosed the income from the business carried on by Preetpal Singh & Company, which was found to be a benami concern of the assessee, there was a failure to disclose fully and truly all material facts necessary for the assessment. The court referenced the Supreme Court case of Malegaon Electricity Co. P. Ltd. v. CIT [1970] 78 ITR 466, concluding that the provisions of section 147(a) were appropriately applied. Thus, the first question was answered in the negative and in favor of the Revenue.

Issue 2: Treating a Registered Firm as a Benami Concern
The court addressed whether a registered firm could be treated as a benami concern of an individual who was not a partner of that firm. The assessee argued that since Preetpal Singh & Company was treated as a registered firm, it could not be considered a benami concern of Shri Sohan Singh. The court rejected this contention, stating that the Income-tax Officer assessing Shri Sohan Singh was not estopped by the conclusions of another officer. The court noted that the Income-tax Officer assessing the firm had also concluded that the firm was not genuine and had made a protective assessment. The court emphasized that such protective assessments are lawful to safeguard the Revenue's interests. The court concluded that the reassessments of Shri Sohan Singh were justified and that the assessments on Preetpal Singh & Company would be vacated if the appellate authorities confirmed the findings. Consequently, the second question was answered in the affirmative and in favor of the Department.

Conclusion:
The reference was answered in favor of the Revenue, with the assessee required to pay the costs of the Department, counsel's fee being Rs. 500.