1982 (10) TMI 3 - HC - Wealth-tax

Issues Involved:
1. Validity of the reopening of the assessment under Section 147(b) of the Income-tax Act, 1961.
2. Determination of the residential status of the assessee under Section 6(5) of the Income-tax Act, 1961.
3. Applicability of Section 3(1)(f) concerning the previous year for the assessee's share income from firms.
4. Overriding effect of Section 3(1)(c) over Section 3(1)(f).

Detailed Analysis:

1. Validity of the Reopening of the Assessment under Section 147(b):
The Income Tax Officer (ITO) initially accepted the assessee's status as a non-resident based on the fact that the assessee left India on April 8, 1968, and did not return during the accounting year. However, an internal audit later revealed that the assessee had share income from firms whose previous years ended on December 31, 1968, and that the assessee had been in India for more than 30 days during that period. Consequently, the ITO issued a notice under Section 148 to reassess the escaped income. The Appellate Assistant Commissioner (AAC) upheld the reopening, but the Tribunal cancelled the reassessment, maintaining the assessee's non-resident status. The High Court, however, found that the reopening was valid as the ITO had new information from the audit report justifying the reassessment.

2. Determination of the Residential Status under Section 6(5):
Section 6(5) creates a legal fiction where if a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income. The High Court concluded that since the assessee was in India for more than 30 days during the previous year relevant to the firm's income (ending December 31, 1968) and maintained a dwelling house, the assessee should be deemed a resident for all sources of income for the assessment year 1969-70.

3. Applicability of Section 3(1)(f) Concerning the Previous Year for Share Income from Firms:
Section 3(1)(f) stipulates that for an assessee who is a partner in a firm, the previous year for the assessee's share in the income of the firm is the period determined as the previous year for the assessment of the income of the firm. The High Court held that this clause applies regardless of other sources of income the assessee might have, thereby making the previous year for the share income from firms ending December 31, 1968, applicable.

4. Overriding Effect of Section 3(1)(c) Over Section 3(1)(f):
The Tribunal had ruled that the previous year determined under Section 3(1)(c) (Tamil Year) could not be altered by Section 3(1)(f). The High Court disagreed, stating that Section 3(1)(f) is not subject to Section 3(1)(c), and both clauses should be read harmoniously. The Court emphasized that different previous years for different sources of income are permissible under Section 3(3) and that Section 6(5) should be given effect to determine the residential status. The High Court found that the Tribunal's interpretation was incorrect and that Section 3(1)(f) should apply alongside Section 6(5) to deem the assessee a resident for all sources of income.

Conclusion:
The High Court concluded that the assessee should be treated as a resident for the assessment year 1969-70 for all sources of income, both for income-tax and wealth-tax purposes. The questions referred to the court were answered in the negative, against the assessee, affirming the Revenue's position. The assessee was ordered to pay the costs of the Revenue.

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