1981 (9) TMI 78 - HC - Income Tax

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147(b) of the Income-tax Act, 1961.
2. Legitimacy of the Income-tax Officer's action in withdrawing the corporation tax rebate of Rs. 90,472.40 under the Finance Act, 1960.

Detailed Analysis:

Issue 1: Validity of Reopening the Assessment under Section 147(b) of the Income-tax Act, 1961

The primary issue was whether the assessment was validly reopened under section 147(b) of the Income-tax Act, 1961. The court examined the conditions under which section 147(b) could be invoked, emphasizing that it necessitates the Income-tax Officer (ITO) having "information in his possession" that leads him to believe that income chargeable to tax has escaped assessment.

The court referred to the Supreme Court's decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996, which clarified that an error discovered on reconsideration of the same material does not empower the ITO to reopen an assessment. The court also cited other Supreme Court decisions, including Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC) and CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC), which supported this interpretation.

The court found that the ITO sought to reopen the assessment purely to rectify an error or mistake from the original assessment, discovered upon reconsideration of the same material. This did not constitute "information" as required under section 147(b). The ITO's notice dated 11th October 1961, and the Commissioner's note directing the ITO to revise the assessment under section 147(b), both indicated that the reopening was based on a mistake or omission in the original assessment, not on new information.

The court concluded that the reopening of the assessment under section 147(b) was invalid, as it was based on the ITO's realization of an error in the original assessment, not on any new information.

Issue 2: Legitimacy of Withdrawing the Corporation Tax Rebate

Given the court's decision on the first issue, it found it unnecessary to address the second issue regarding the legitimacy of the ITO's action in withdrawing the corporation tax rebate of Rs. 90,472.40 under the Finance Act, 1960. The court's negative answer to the first question rendered the second question moot.

Conclusion

The court answered the first question in the negative, ruling that the assessment was not validly reopened under section 147(b) of the Income-tax Act, 1961. Consequently, it did not address the second question. The court ordered the Revenue to pay the costs of the assessee.