1975 (6) TMI 2 - HC - Income Tax

Assessment Proceedings, Business Income, Income Escaping Assessment, Reassessment Proceedings

Summary

Issues:
Validity of reopening assessment under section 147(b) for the assessment year 1965-66 based on the nature of the company as a trading or manufacturing company.

Analysis:
The High Court of Kerala was tasked with determining the validity of the reopening of the assessment under section 147(b) for the assessment year 1965-66. The case involved an assessee company that was initially assessed by the Income Tax Officer (ITO) with a rebate on export profits at 4.6%. Subsequent rectifications and appeals led to conflicting decisions regarding the nature of the company, whether it was a public limited company or one substantially interested by the public. The dispute centered around whether the company qualified for a higher rebate rate of 30% as a manufacturing company under the Finance Act, 1965.

The Tribunal upheld the reassessment order, concluding that the original assessment was passed without reference to the provisions of the Finance Act, 1965. The Court referred to the Supreme Court's decision in A. Raman & Co.'s case, emphasizing that the ITO's jurisdiction to reassess income arises if he has reason to believe that income has escaped assessment based on information in his possession. The Court clarified that such information could be derived from the material on record or other sources, even if it could have been obtained during the previous assessment.

The Court highlighted the importance of realizing and recognizing the implications of information available to the ITO for it to qualify as a basis for reassessment. It referenced previous decisions to support the principle that a change of opinion due to new information does not render section 147 inapplicable. The Court distinguished cases cited by the assessee, emphasizing that the principle of those decisions did not apply to the facts presented in the current case.

Ultimately, the Court affirmed the Tribunal's view, ruling in favor of the department and against the assessee. The Court concluded that the reassessment was valid based on the information available to the ITO, and the assessee was directed to pay the costs of the reference.