1983 (9) TMI 140 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner under Section 263 of the Income-tax Act, 1961.
2. Merits of the assessee's status as "a company in which public are substantially interested."

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Commissioner under Section 263 of the Income-tax Act, 1961:

The primary issue revolves around whether the Commissioner had the jurisdiction to revise the assessment order under Section 263. The assessee argued that the time limit for invoking Section 263 should start from the original assessment date (18-11-1977) and not from the date of the subsequent assessment (30-1-1979). The assessee contended that the subsequent order merely repeated the original order, and thus, the Commissioner was interfering with the finding in the first order, which should be time-barred.

The Commissioner, however, held that the assessment under Section 143(1) does not survive once a notice under Section 143(2) is issued, and the subsequent assessment is a "fresh assessment." The Tribunal agreed with the Commissioner, stating that once a fresh assessment is made, the original assessment gets "washed out." The Tribunal emphasized that the only assessment that stands is the fresh assessment made in pursuance of the notice under Section 143(2)(b). The Tribunal concluded that the order under Section 263 passed on 29-1-1981 with reference to the assessment made on 30-1-1979 is within time and valid in law regarding jurisdiction.

2. Merits of the assessee's status as "a company in which public are substantially interested":

On the merits, the assessee objected to the Commissioner's conclusion that it did not qualify as a company in which the public are substantially interested. The Commissioner had noted that out of 19,500 shares, 7,400 shares were held by Sundaram Charities, a public charitable trust, and assumed that two other shareholders did not fall under any exceptions. Thus, he concluded that more than 60% of the shares were held by three persons, disqualifying the company from concessional tax rates.

The assessee argued that Sundaram Charities, being a public charitable trust, should be excluded from the calculation, and Southern Roadways Ltd. should be considered a public company. The Tribunal found that the Commissioner's order lacked reasoning and particulars regarding this issue. The Tribunal noted that the question of status could not be decided merely based on Sundaram Charities' shareholding and required a fresh examination of facts.

The Tribunal upheld the Commissioner's decision to set aside the assessment on the question of status but directed that the entire question of status should be considered de novo by the ITO in accordance with the law. The Tribunal emphasized the need for a thorough examination of relevant facts and provided both sides the opportunity to present their case.

Conclusion:

The Tribunal concluded that the Commissioner's jurisdiction under Section 263 was valid and within the time limit. On the merits, the Tribunal directed a fresh examination of the assessee's status as a company in which the public are substantially interested, allowing the appeal partly for statistical purposes.