1979 (8) TMI 39 - HC - Income Tax

Summary

Issues Involved:

1. Jurisdiction of the Income Tax Officer (ITO) under Section 150 of the Income Tax Act, 1961.
2. Validity of the addition of Rs. 78,793 to the gross profit in the reassessment for the assessment year 1959-60.
3. Distinction between reassessment proceedings under Sections 147(a) and 150 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Income Tax Officer (ITO) under Section 150 of the Income Tax Act, 1961:

The court examined the scope of Section 150, which allows for the issuance of a notice at any time for making an assessment or reassessment in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference, or revision. The court emphasized that the power to reassess under Section 150 is specifically to give effect to the findings or directions of appellate or revisional authorities and is not subject to the time limitations prescribed under Section 149. The court clarified that Section 150 is designed to address situations where an appellate or revisional order necessitates a reassessment, and this provision does not equate to the broader reassessment powers under Section 147.

2. Validity of the addition of Rs. 78,793 to the gross profit in the reassessment for the assessment year 1959-60:

The court analyzed whether the ITO was justified in adding Rs. 78,793 to the gross profit during the reassessment for the assessment year 1959-60. The court noted that the reassessment was initiated to bring to tax the sum of Rs. 90,721, which was deleted from the assessment for the year 1960-61 by the Appellate Assistant Commissioner (AAC). The court held that the ITO's jurisdiction under Section 150 was limited to giving effect to the AAC's finding, which only pertained to the sum of Rs. 90,721. Consequently, the court found that the ITO had no authority to make an additional assessment of Rs. 78,793 for the deficiency in gross profit, as it was not related to the AAC's finding or direction.

3. Distinction between reassessment proceedings under Sections 147(a) and 150 of the Income Tax Act, 1961:

The court distinguished between the reassessment proceedings under Sections 147(a) and 150. Section 147(a) pertains to cases where income has escaped assessment due to the assessee's failure to disclose fully or truly all material facts, whereas Section 150 deals with reassessment to give effect to appellate or revisional orders. The court rejected the revenue's argument that the reassessment under Section 150 should be treated similarly to Section 147(a) reassessments, where the ITO could reassess all items of escaped income. The court emphasized that the reassessment under Section 150 is confined to the specific findings or directions of the appellate or revisional authority.

Conclusion:

The court concluded that the ITO had no jurisdiction to include the sum of Rs. 78,793 towards the deficiency in gross profit for the assessment year 1959-60 in the reassessment made under Section 150. The reassessment under Section 150 was limited to giving effect to the AAC's finding regarding the sum of Rs. 90,721. Therefore, the court answered the question in the negative, in favor of the assessee, and against the revenue. The Commissioner was ordered to pay the costs, with advocates' fees set at Rs. 300.