1964 (5) TMI 50 - HC - Income Tax

Summary

Issues Involved:
1. Competency of the Excess Profits Tax Officer to reopen assessments under Section 15 of the Excess Profits Tax Act.
2. Competency of the Excess Profits Tax Officer to apply Section 10A in the revised assessment under Section 15.

Detailed Analysis:

Issue 1: Competency to Reopen Assessments under Section 15
The primary question was whether there was any "definite information" within the meaning of Section 15 of the Excess Profits Tax Act that justified the reopening of the excess profits tax assessments. The relevant provision states that if, in consequence of definite information, the Excess Profits Tax Officer discovers that profits chargeable to excess profits tax have escaped assessment, he may proceed to assess or reassess such profits.

The court noted that the term "definite information" must be specific and certain, not vague. It should not merely be a change of opinion based on the same facts previously considered. The court referenced several precedents indicating that a subjective decision of the same or higher authority cannot constitute "definite information" for reopening proceedings. The court cited cases such as Commissioner of Income-tax v. Mahomed Yusuf Ismail, Fazal Dhala v. Commissioner of Income-tax, and Raghavalu Naidu and Sons v. Commissioner of Income-tax to support this view.

In this case, the Excess Profits Tax Officer reopened the assessment based on the Appellate Assistant Commissioner's finding that the Farrukhabad business was no longer owned by the assessee. This finding was based on material already before the Excess Profits Tax Officer during the original assessment. The court held that this did not constitute "definite information" as it was merely a change of opinion on the same facts. Therefore, the Excess Profits Tax Officer was not competent to reopen the assessment under Section 15.

Issue 2: Competency to Apply Section 10A in the Revised Assessment
Given the finding on the first issue, the court examined whether the Excess Profits Tax Officer was competent to apply Section 10A in the revised assessment under Section 15. Section 10A allows the Excess Profits Tax Officer to annul any transaction if the main purpose of the transaction was the avoidance or reduction of excess profits tax liability.

The court held that an order under Section 10A could only be passed if the Excess Profits Tax Officer had valid jurisdiction in a pending assessment proceeding. Since the proceedings under Section 15 were void due to the lack of "definite information," the Excess Profits Tax Officer had no jurisdiction to make an order under Section 10A in those proceedings. Therefore, the application of Section 10A in the revised assessment was also invalid.

Conclusion:
The court answered both questions in the negative. The Excess Profits Tax Officer was not competent to reopen the assessments under Section 15, and consequently, he was also not competent to apply the provisions of Section 10A in the revised assessment. The judgment emphasized the necessity of "definite information" for reopening assessments and clarified that a mere change of opinion does not meet this requirement. The assessee was entitled to costs assessed at Rs. 200, and the counsel's fee was also assessed at Rs. 200.