1976 (8) TMI 19 - HC - Income Tax

Summary

Issues Involved:
1. Legality and validity of initiation of proceedings u/s 34(1A) for assessment years 1943-44 to 1946-47.
2. Jurisdiction of the Income-tax Officer to reopen assessments.

Summary:

Issue 1: Legality and Validity of Initiation of Proceedings u/s 34(1A)
The primary question was whether the initiation of proceedings u/s 34(1A) against the assessee for the assessment years 1943-44 to 1946-47 was legal and valid when the assessments already made were not cancelled by a competent authority and the department was pursuing tax recovery under those assessments. The assessee's case was referred to the Income-tax Investigation Commission in 1950, which led to revised assessment orders on January 31, 1953. The Supreme Court later quashed these orders on February 14, 1957, but allowed the revenue to initiate proceedings u/s 34(1A). Notices for reassessment were issued on March 28, 1956, and the assessee filed wealth statements. The Income-tax Officer rejected the assessee's objections and assessed additional income, but the Appellate Assistant Commissioner set aside these reassessments, deeming them illegal. The Tribunal upheld this decision, stating that the reassessments were invalid as the original assessments were still in force until quashed by the Supreme Court.

Issue 2: Jurisdiction of the Income-tax Officer to Reopen Assessments
The Tribunal found that the Income-tax Officer had no jurisdiction to reopen the assessments as he could not have entertained a reasonable belief that income had escaped assessment. The revenue's argument that the revised assessments were known to be illegal was rejected because recovery proceedings based on those assessments were still ongoing. The Tribunal concluded that the Income-tax Officer could not have reasonably believed that income had escaped assessment when recovery proceedings were active. The High Court agreed, stating that the essential condition for initiating proceedings u/s 34(1A) was not met, as the Income-tax Officer could not have had a bona fide belief that income had escaped assessment.

Conclusion:
The High Court answered the question in the negative, ruling against the revenue. The revenue was ordered to pay the costs of the heirs of the deceased assessee.