1978 (3) TMI 54 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notices issued under Section 148 of the Income Tax Act, 1961 for various assessment years.
2. Alleged non-disclosure by the assessee regarding contributions to the Grindlays Superannuation Fund.
3. Alleged non-disclosure of head office expenses.
4. Alleged non-disclosure regarding depreciation on ICT Tabulators and Blue Star Accounting Machines.
5. Validity of reopening assessments under Section 147(b) based on new information.

Issue-Wise Detailed Analysis:

1. Validity of Notices Issued Under Section 148:
The petitioner challenged the notices issued under Section 148 of the Income Tax Act, 1961, for several assessment years. The court examined whether the reasons recorded by the Income Tax Officer (ITO) justified the reopening of assessments. The petitioner argued that there was no omission or failure on their part to disclose material facts during the original assessments.

2. Alleged Non-Disclosure Regarding Contributions to Grindlays Superannuation Fund:
The ITO claimed that the petitioner did not disclose that contributions to the Grindlays Superannuation Fund were debited to the Indian profit and loss account and that no evidence was produced to show that the fund was recognized. The court found that the petitioner had disclosed all relevant facts, including a letter dated 19th November 1956, which was produced during the original assessments. The court held that there was no omission or failure on the part of the petitioner regarding this issue.

3. Alleged Non-Disclosure of Head Office Expenses:
The revenue argued that the petitioner had claimed excessive head office expenses, leading to under-assessment of income. The court noted that the original assessing officers were fully aware of the various items claimed as head office expenses. The court held that any error in allowing these expenses was due to the assessing officer's mistake and not due to any omission or failure by the petitioner.

4. Alleged Non-Disclosure Regarding Depreciation on ICT Tabulators and Blue Star Accounting Machines:
The petitioner claimed depreciation on these machines, which were not used due to labor trouble. The court found that the petitioner had disclosed this fact during the original assessments. The court held that whether the machines were "used for the purpose of business" was a matter for the ITO to decide based on legal principles. The court concluded that there was no omission or failure on the part of the petitioner regarding this issue.

5. Validity of Reopening Assessments Under Section 147(b) Based on New Information:
The revenue argued that the report of the Public Accounts Committee (PAC) constituted new information justifying the reopening of assessments for the years 1969-70 and 1970-71. The court found that the PAC report did not form any opinion but merely indicated allegations made by an ex-employee of the petitioner. The court held that the PAC report did not constitute "information" within the meaning of Section 147(b) and that the reopening of assessments on this basis was not justified.

Conclusion:
The court ruled in favor of the petitioner, holding that there was no omission or failure on their part to disclose material facts for the relevant assessment years. The court quashed the notices issued under Section 148 for the assessment years 1958-59 to 1970-71. The court also directed the respondents to recall, cancel, and withdraw the notices and to refrain from giving effect to any of them. The operation of the order was stayed for eight weeks, and the injunctions granted in the respective civil rules were also continued for the same period.