1989 (4) TMI 2 - SC - Income Tax

Statutory Agent - reassessment u/s 147(b) on non-resident to reapportion overhead expenses between income from sales and from commission - Whether the Tribunal was right in holding that the reassessments being only consequent to a change as to the method of computation of the profits, the initiation of proceedings u/s148 was justified - Held, yes - Whether the Tribunal was right in law in holding reassessment proceedings could not be initiated against the assessee direct

Summary

Issues:
1. Jurisdiction of the Income-tax Officer to initiate reassessment proceedings under sections 147 and 148 of the Income-tax Act.
2. Whether the Income-tax Officer can proceed directly against the assessee after initiating assessment proceedings against the agent.

Analysis:

Jurisdiction of the Income-tax Officer for Reassessment:
The case involved appeals against the High Court of Andhra Pradesh's judgment answering two questions of law in favor of the Revenue. The first issue was whether the reassessments for the assessment years 1959-60 and 1960-61 were justified under section 148 of the Income-tax Act. The Income-tax Officer initiated reassessment proceedings based on information obtained during the assessment for the subsequent year, revealing that overhead expenses related to the entire business, not just the purchase and sale of tobacco. The High Court held that this was not a mere change of opinion but a valid reason to believe income had escaped assessment, falling within the terms of section 147 of the Act. The court concluded that the reassessments were valid, rejecting the assessee's argument against the jurisdiction of the Income-tax Officer.

Proceedings Against Assessee After Agent's Assessment:
The second issue addressed whether the Income-tax Officer could proceed directly against the assessee after initiating assessment proceedings against the agent. The Appellate Tribunal initially set aside the reassessments, stating they were without jurisdiction and that assessments had been made on the agents, precluding direct proceedings against the assessee. However, the High Court ruled that once it was determined that reassessment proceedings against the agents were time-barred, the Income-tax Officer could proceed directly against the assessee. The High Court's decision was upheld, emphasizing that the agent's assessment proceedings, which were dropped due to time limitations, could not prevent direct reassessment proceedings against the assessee. Consequently, the appeals were dismissed, affirming the validity of the reassessments and the Income-tax Officer's authority to proceed directly against the assessee.

This comprehensive analysis highlights the key legal issues, the court's reasoning, and the final judgment, ensuring a detailed understanding of the legal complexities involved in the case.