1978 (5) TMI 26 - HC - Income Tax

1980 (1) TMI 24 - HC

Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income-tax Act, 1961.
2. Applicability of the Supreme Court decision in J. P. Jani, ITO v. Induprasad Devshankar Bhatt.
3. Interpretation of Section 34 of the Indian Income-tax Act, 1922, and its amendments.
4. Impact of the Indian Income-tax (Amendment) Act, 1959, on the reassessment proceedings.

Issue-wise Detailed Analysis:

1. Validity of reassessment proceedings under Section 147 of the Income-tax Act, 1961:
The assessee was initially assessed for the year 1947-48. On 29th February 1964, it was discovered that the assessee had made undisclosed deposits totaling Rs. 56,996. Consequently, a notice under Section 147 of the Income-tax Act, 1961, was issued on 29th March 1964. The reassessment added the undisclosed deposits to the assessee's total income. The Tribunal found that the right to reopen the assessment under Section 34(1)(a) of the Indian Income-tax Act, 1922, had become time-barred after 31st March 1962, and could not be revived under the new Act.

2. Applicability of the Supreme Court decision in J. P. Jani, ITO v. Induprasad Devshankar Bhatt:
The Tribunal relied on the Supreme Court decision in J. P. Jani [1969] 72 ITR 595 (SC) to conclude that a notice under Section 148 could not be issued if the right to reopen had become barred under the earlier Act. The Supreme Court in J. P. Jani held that Section 297(2)(d)(ii) of the Income-tax Act, 1961, did not revive the right to reopen an assessment already barred under the earlier Act. This decision was based on a concession by the revenue that the right to reopen the assessment had become time-barred.

3. Interpretation of Section 34 of the Indian Income-tax Act, 1922, and its amendments:
The court examined various amendments to Section 34 of the Indian Income-tax Act, 1922. Initially, the section allowed reopening within eight years. The Finance Act of 1956 amended it, removing the eight-year limit and adding provisos that allowed reopening if the escaped income amounted to one lakh rupees or more. The Indian Income-tax (Amendment) Act, 1959, introduced sub-section (4) to Section 34, allowing notices to be issued even if the eight-year period had expired before the 1956 amendment.

4. Impact of the Indian Income-tax (Amendment) Act, 1959, on the reassessment proceedings:
The court considered the majority judgment in S. C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC), which held that Section 34(4) validated actions initiated after the 1959 amendment. This sub-section allowed the reopening of assessments even if the eight-year period had expired before the new Act came into force. Therefore, the right to reopen the assessment in the instant case had not become time-barred by 31st March 1962, and the Income-tax Officer was justified in issuing the notice under Section 148.

Conclusion:
The court concluded that the reassessment proceedings under Section 147 of the Income-tax Act, 1961, were valid. The Tribunal's reliance on J. P. Jani was misplaced as the Supreme Court in that case did not consider sub-section (4) of Section 34. The court answered the referred question in the negative, in favor of the revenue, and acknowledged the assistance of Mr. Sanjoy Bhattacharya as amicus curiae.

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