1974 (10) TMI 22 - HC - Income Tax

Assessment Proceedings, Bona Fide, Gift Tax, Income Tax Authorities, Market Value, Reason To Believe, Reassessment Proceedings

Summary

Issues:
- Challenge to proposed revised assessment for the assessment year 1966-67
- Deduction of interest on borrowings from business income
- Reallocation of interest between business income and dividend income
- Jurisdiction of the Income-tax Officer in issuing notice under section 147(b)
- Interpretation of sections 80M, 80K, 85, and 85A for deduction and relief
- Application of law regarding excessive relief in assessment
- Reasonable belief for issuing notice under section 147(b)

Analysis:
The case involves a petition seeking a writ of prohibition against the Income-tax Officer to prevent the proposed revised assessment for the assessment year 1966-67. The petitioner had been previously assessed, with deductions claimed for interest on borrowings from business income. The Income-tax Officer later reallocated a portion of the interest between business income and dividend income, affecting the benefit of certain sections for the assessee. Subsequently, a notice under section 147(b) was issued for revising the 1966-67 assessment, prompting the petition challenging the jurisdiction of the Income-tax Officer in issuing the notice.

The court examined the provisions of sections 80M, 80K, 85, and 85A to determine the deduction and relief applicable to the case. The Income-tax Officer's view that the income had received excessive relief in the 1966-67 assessment was disputed based on the interpretation of relevant sections. The court referred to a previous judgment regarding the allowance of rebate on dividend income without restricting it to "net dividend," rejecting the contention of excessive relief. The court emphasized that the law declared in the judgment applied even at the time of issuing the notice under section 147(b), leading to the conclusion that there was no reasonable belief for income escaping assessment.

Ultimately, the court found that the grounds presented were sufficient to grant the writ of prohibition, thereby allowing the petition and making the rule absolute. The court did not delve into other questions, such as whether the Income-tax Officer had changed opinion, as the main issue regarding excessive relief was determinative in issuing the writ. The judgment concluded with no costs awarded in the matter.