1982 (9) TMI 21 - HC - Income Tax

Summary

Issues Involved:

1. Determination of the residential status of the assessee.
2. Assessability of Rs. 40,000 brought by the assessee from East Africa in January 1946 under section 4(1)(b)(iii) of the Indian Income-tax Act, 1922.

Issue-Wise Detailed Analysis:

1. Determination of the Residential Status of the Assessee:

The primary issue was whether the Tribunal was correct in law in determining the residential status of the assessee as "resident but not ordinarily resident" under section 4A of the Indian Income-tax Act, 1922. Initially, the assessee was assessed as "non-resident" for the assessment year 1946-47. However, during the reassessment proceedings, the ITO changed the status to "resident but not ordinarily resident," which was contested by the assessee. The Tribunal upheld the ITO's decision, which led to the assessee's appeal to the High Court.

The High Court, after considering the arguments, found merit in the Revenue's contention that the assessee had intentionally withheld material facts regarding his residential status and investments. It was emphasized that the duty to disclose all primary facts relevant to the assessment lies on the assessee, as established in the Supreme Court's judgment in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191. The assessee failed to disclose significant investments made during the relevant period, which led to the reassessment under section 34 of the Act. The Court concluded that the original non-disclosure of material facts justified the reassessment and the change in residential status.

2. Assessability of Rs. 40,000 Brought by the Assessee from East Africa:

The second issue was whether the sum of Rs. 40,000 brought by the assessee from East Africa in January 1946 was assessable under section 4(1)(b)(iii) of the Indian Income-tax Act, 1922. The ITO included this amount in the reassessment, which was contested by the assessee. The Tribunal restored this addition, leading to the assessee's appeal.

The High Court upheld the Tribunal's decision, noting that the assessee's failure to disclose his true residential status and the investments made during the relevant period justified the inclusion of the Rs. 40,000 in the reassessment. The Court referred to the Tribunal's observations, which highlighted the assessee's intention to stay in India permanently, as evidenced by his investments in property and agricultural land soon after his arrival. The Tribunal's conclusion that the assessee's residential status was "resident but not ordinarily resident" was based on facts existing during the accounting period, thus justifying the assessability of the Rs. 40,000.

Conclusion:

The High Court answered both questions in favor of the Revenue and against the assessee. The Court found that the assessee failed to disclose fully and truly all material facts at the time of the original assessment, justifying the reassessment proceedings and the change in residential status. Consequently, the sum of Rs. 40,000 brought from East Africa was assessable in the assessment year 1946-47. No order as to costs was made.