1975 (6) TMI 7 - HC - Income Tax

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

Summary

Issues:
1. Validity of reassessment proceedings under sections 147 and 148 of the Income-tax Act, 1961.
2. Jurisdiction of the tax officer to recompute business income in reassessment proceedings.
3. Interpretation of the law regarding reassessment of escaped income.

Analysis:
The High Court of Calcutta addressed the issue of reassessment proceedings under sections 147 and 148 of the Income-tax Act, 1961. The case involved the reassessment of business income of the assessee due to property income that had escaped assessment. The court examined whether the Income-tax Officer had the authority to recompute the business income in such circumstances.

The facts of the case related to the assessment years 1959-60 and 1960-61, where the income from house property and business of the assessee was determined. Subsequently, another tax officer initiated reassessment proceedings under section 147(b) of the Act upon discovering the escaped income from a property owned by the assessee. The reassessment included not only the property income but also a reevaluation of the business income for the respective years.

Upon appeal, the Appellate Assistant Commissioner acknowledged the under-assessment of business income for 1960-61 but held that the subsequent tax officer lacked jurisdiction to reassess the business income under section 147(b) of the Act. However, the Tribunal dismissed the revenue's appeal, upholding the Appellate Assistant Commissioner's decision.

The court considered the arguments presented by both parties. The counsel for the revenue contended that reassessment is a fresh assessment, allowing the subsequent tax officer to reassess the business income for the relevant years. Citing a Supreme Court decision, the counsel argued that once reassessment is initiated, the entire escaped income can be taxed, not limited to specific portions.

Conversely, the counsel for the assessee argued that while the tax officer can tax the entire escaped income, reevaluation of business income de novo is beyond the officer's power. Referring to a Madras High Court case, the counsel emphasized that the tax officer must tax the escaped income except where a notice under section 34(1)(b) cannot be issued after four years.

The High Court relied on the Supreme Court's decision in a previous case, stating that if a part of the assessable income had erroneously escaped assessment, the tax officer is obligated to levy tax on the entire escaped income. The court found that in the assessment year 1960-61, a part of the business income had indeed escaped assessment due to the previous tax officer's error. Therefore, the subsequent tax officer rightfully reassessed the business income for that year.

In conclusion, the High Court answered the question in favor of the revenue for the assessment year 1960-61, as the reassessment of business income was deemed valid. No costs were awarded in this case.

Judge(s): S. C. DEB., DIPAK KUMAR SEN