1980 (12) TMI 11 - HC - Income Tax

Summary

Issues:
1. Validity of canceling assessments made under section 147(a) of the Income-tax Act, 1961.
2. Conversion of provisions under section 147(a) into section 147(b) of the Income-tax Act, 1961.

Issue 1: Validity of canceling assessments made under section 147(a):
The case involved an assessee, a limited company, who owned a building leased to the American Embassy. Upon the Embassy vacating the building, it was requisitioned by the Government. The Income Tax Officer (ITO) initiated proceedings under section 147(a) of the Income-tax Act, 1961, due to discrepancies in the rent amount. The Appellate Tribunal canceled the assessments made by the ITO, stating that the assessee had disclosed all material facts necessary for assessment. The Tribunal relied on precedents like S. M. Dahanukar v. CIT [1968] 69 ITR 504 (Bom) to support its decision. The High Court affirmed the Tribunal's decision, emphasizing that the assessee had fulfilled its obligation to disclose primary facts, and the under-assessment was not due to non-disclosure.

Issue 2: Conversion of provisions under section 147(a) into section 147(b):
The department contended that the assessments could be saved under section 147(b) of the Income-tax Act, 1961, based on information about enhanced rent. However, the Tribunal rejected this argument, citing a Full Bench judgment of the Allahabad High Court in Raghubar Dayal Ram Kishan v. CIT [1967] 63 ITR 572. The Tribunal held that it lacked jurisdiction to convert assessments made under section 147(a) into section 147(b). The High Court concurred with this view, noting the distinct and independent nature of the two provisions. The Court referenced the case of Johri Lal (HUE) v. CIT [1973] 88 ITR 439 (SC) to highlight the specific conditions required for notices under section 147(b). The Court also mentioned the Calcutta High Court's stance in ITO v. Eastern Coal Co. Ltd [1975] 101 ITR 477, allowing the conversion of notices between the two sections if the conditions of section 147(b) were met. The High Court answered the second question in the negative, supporting the department's position.

In conclusion, the High Court upheld the Tribunal's decision to cancel the assessments made under section 147(a) and affirmed that the conversion of provisions under section 147(a) into section 147(b) was not permissible based on the specific conditions outlined in the respective provisions.