1979 (9) TMI 54 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Income-tax Officer to reopen assessment proceedings under the Companies (Profits) Surtax Act, 1964.
2. Validity of reassessment proceedings under section 8(b) of the Companies (Profits) Surtax Act, 1964.
3. Applicability of rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, in reducing the assessee-company's capital.
4. Legality of the reduction in assessment under section 8(b) of the Companies (Profits) Surtax Act, 1964.

Analysis:

The case involved an application under the Companies (Profits) Surtax Act, 1964, where the Commissioner of Income Tax (CIT) sought a direction for the Income-tax Appellate Tribunal to state a case and refer questions to the High Court. The key issues revolved around the jurisdiction of the Income-tax Officer to reopen assessment proceedings and the validity of reassessment under section 8(b) of the Act. The Tribunal found that the assessment proceedings were pending as no order dropping the proceedings had been recorded, relying on precedents like CIT v. M. K. K. R. Muthukaruppan Chettiar. The Tribunal emphasized the need for the disposal of filed returns before issuing a reassessment notice.

The petitioner argued that certain notings made by the Income-tax Officer concluded the assessment proceedings, citing relevant Supreme Court and Madras High Court decisions. However, the High Court differentiated these cases from the present scenario, where the noting indicated the proceedings had been dropped earlier without any formal order concluding the proceedings. The Court emphasized that the noting did not operate in praesenti and lacked substantiation through an order or formal noting, indicating the closure of proceedings.

Regarding the applicability of rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, the Court highlighted that questions 3 and 4, which addressed the merits of reassessment, had already been decided against the department in a previous judgment. The Court referred to the decision in Commr. of Surtax v. Ballarpur Industries Ltd., indicating that these questions had been previously answered and were thus academic if the Income-tax Officer had no jurisdiction to reopen assessments.

Conclusively, the application was dismissed by the High Court, emphasizing the clarity of the noting and the lack of necessity to refer questions 1 and 2. The judgment highlighted the importance of formal orders or notings to conclude assessment proceedings and reiterated the previous rulings on the applicability of rule 4 in reducing the assessee-company's capital.