1997 (4) TMI 18 - SC - Income Tax

During the course of a raid by the customs authorities cash amount was found in the locker standing in the name of the assessee with the PNB - After receiving the necessary information about the said recovery, the Income-tax Officer included the said amount in the assessment of the assessee for the year 1956-57 under the head Income from other sources - Tribunal was not right in holding that Explanation 2 to section 153 was not applicable

Summary

Issues:
1. Interpretation of provisions under the Income-tax Act, 1961 regarding the inclusion of a cash amount found during a raid in the assessment of the assessee.
2. Application of section 147(a) in reassessment for the assessment year 1958-59.
3. Interpretation of section 297(2)(k) and Explanation 2 to section 153(3) in relation to the direction given by the Tribunal.
4. Applicability of section 297(2)(d)(ii) and section 297(2)(k) in the context of section 150(1) of the Act.

Analysis:
The judgment in question pertains to an appeal challenging the inclusion of a cash amount of Rs. 47,000 found during a raid in the assessment of the assessee under the Income-tax Act, 1961. Initially, the Income-tax Officer included the amount in the assessment for the year 1956-57, but on appeal, it was held that the amount should be treated as income for the assessment year 1957-58. Subsequently, the Tribunal determined that the amount should be considered in the assessment year 1958-59 as income from undisclosed sources. This led to a notice under section 147 for reassessment for the year 1958-59, where the income was redetermined to include the sum of Rs. 47,000. The Appellate Assistant Commissioner contended that section 147(a) could not be invoked as all materials were initially provided to the Income-tax Officer. Additionally, the Appellate Assistant Commissioner invoked section 153(3) and section 297(2)(k) to support the assessee's case.

The Tribunal referred a question of law to the High Court regarding the applicability of Explanation 2 to section 153(3). The High Court held that section 297(2)(d)(ii) was not applicable and Explanation 2 to section 153(3) could not be used. However, the Supreme Court, citing a previous judgment, clarified that section 150(1) would be applicable to orders passed by the Tribunal under the Indian Income-tax Act, 1922, based on a liberal interpretation of section 297(2)(d)(ii) and section 297(2)(k). The Court noted conflicting views among different High Courts and affirmed the judgment of the Allahabad High Court. Consequently, the appeal was allowed, the High Court's decision was set aside, and the question referred by the High Court was answered in favor of the Revenue and against the assessee. No costs were awarded in this matter.