1979 (6) TMI 78 - AT - Income Tax

Issues Involved:
1. Jurisdiction of ITO to initiate proceedings under Section 148 of the IT Act, 1961.
2. Source of Rs. 4,25,000 advanced by the assessee.
3. Validity of reassessment proceedings under Section 147(a)/148 of the IT Act, 1961.
4. Admissibility of evidence produced during proceedings under Section 34 of the Indian IT Act, 1922.
5. Legal implications of the findings from previous assessments and affidavits.

Detailed Analysis:

1. Jurisdiction of ITO to Initiate Proceedings under Section 148 of the IT Act, 1961:
The assessee contended that the ITO, who completed the assessment under Section 148 of the IT Act, 1961, lacked jurisdiction since the ITO, Bombay, had already dropped proceedings initiated under Section 34 of the Indian IT Act, 1922. The ITO, Jodhpur, relied on Notification No. S.R.O. 341 dated 13th Feb., 1956, which stated that the ITO, Bombay, ceased to have jurisdiction over residents of erstwhile native states. The Tribunal held that the ITO, Jodhpur, was competent to start proceedings under Section 148 of the IT Act, 1961, as the proceedings under Section 34 had been dropped before 1957, and no proceedings were pending at the commencement of the new Act.

2. Source of Rs. 4,25,000 Advanced by the Assessee:
The main controversy was whether the sum of Rs. 4,25,000 was earned by the assessee in Bombay or came from his maternal grandmother, Smt. Bageli Bai. The assessee provided overwhelming evidence, including affidavits and declarations from Smt. Bageli Bai, showing that the money was advanced by her. The Tribunal noted that the evidence remained uncontroverted and that the Department had the opportunity to cross-examine but did not do so. The Tribunal concluded that the sum was indeed advanced by Smt. Bageli Bai and not earned by the assessee.

3. Validity of Reassessment Proceedings under Section 147(a)/148 of the IT Act, 1961:
The assessee argued that the reassessment proceedings were merely a change of opinion since the ITO, Bombay, had previously dropped the proceedings. The Tribunal found that the ITO, Jodhpur, was justified in starting proceedings under Section 147(a)/148 of the Act as the proceedings under Section 34 were dropped before 1957, and no proceedings were pending at the commencement of the new Act.

4. Admissibility of Evidence Produced during Proceedings under Section 34 of the Indian IT Act, 1922:
The Revenue contended that the evidence produced during proceedings under Section 34 should be ignored as the ITO, Bombay, lacked jurisdiction. The Tribunal rejected this contention, stating that the ITO, Bombay, had reason to believe that income had escaped assessment and started proceedings under Section 34. The Tribunal held that the evidence produced was admissible and reliable, citing the decision in Seth Gurmukh Singh and Another vs. CIT.

5. Legal Implications of the Findings from Previous Assessments and Affidavits:
The Tribunal noted that the affidavits and declarations filed by Smt. Bageli Bai were detailed and remained uncontroverted. The Tribunal also considered the findings from previous assessments, including those by the GTO and the Asstt. Controller of Estate Duty, which accepted the genuineness of the sum advanced by Smt. Bageli Bai. The Tribunal concluded that the addition of Rs. 4,25,000 in the hands of the assessee was unjustified and deleted the addition.

Conclusion:
The Tribunal allowed the appeal, holding that the sum of Rs. 4,25,000 was advanced by Smt. Bageli Bai and not earned by the assessee. The ITO, Jodhpur, was competent to initiate proceedings under Section 148 of the IT Act, 1961, and the evidence produced during the proceedings under Section 34 of the Indian IT Act, 1922, was admissible and reliable.

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