1967 (2) TMI 18 - HC - Income Tax

Petitioner challenges the validity of those assessment orders and of the recovery proceedings taken consequent thereto - petition is allowed - order made by the Commissioner of Income-tax is quashed - Commissioner of Income-tax is directed to consider and determine afresh the earlier revision application filed by the petitioner

Summary

Issues:
Validity of assessment orders and recovery proceedings; Deduction claimed by Pandit Deo Sharma; Assessment of income received under an agreement; Dismissal of appeals by the Tribunal; Commissioner's rejection of revision applications; Jurisdiction of the Commissioner; Protective assessment; Interpretation of agreement for work and remuneration.

Validity of Assessment Orders and Recovery Proceedings:
The petitioner challenged the validity of income-tax assessment orders for the years 1944-45, 1945-46, and 1946-47, along with the recovery proceedings. The assessments were made against the petitioner, Sheo Nath Prasad Sharma, based on returns filed. The Income-tax Officer assessed the petitioner despite his claim that income received from Pandit Deo Sharma was not taxable in his hands. Recovery proceedings were initiated, but later stayed as a protective measure. The Commissioner dismissed the petitioner's revision applications, citing that the petitioner had shown the incomes assessed, thus rejecting the applications solely on this ground.

Deduction Claimed by Pandit Deo Sharma:
Pandit Deo Sharma, through an agreement with the petitioner, claimed a deduction for the amount paid to the petitioner under an agreement dated November 14, 1942. Despite appeals to various authorities, the deduction was not allowed. The Tribunal refused to refer the case to the High Court under section 66(1) of the Indian Income-tax Act, leading to a reference application being filed in court. The petitioner's income tax returns included the amount received under the agreement, leading to assessments by the Income-tax Officer.

Dismissal of Appeals by the Tribunal:
The petitioner filed appeals against the assessment orders before the Appellate Assistant Commissioner and later to the Tribunal. However, during the Tribunal hearing, the petitioner sought an adjournment, which was denied, resulting in the dismissal of the appeals. Notably, no appeal was filed for the assessment year 1946-47.

Commissioner's Rejection of Revision Applications:
The Commissioner dismissed the petitioner's revision applications under section 33A(2) on the grounds that the income was shown in the returns, thus lacking merit for revision. The Commissioner's subsequent order, refusing to reconsider the matter, was based on the finality of the earlier revision order, stating that he could not pass another order on the same point.

Jurisdiction of the Commissioner and Protective Assessment:
The petitioner argued that the Commissioner should have considered the merits of the revision application based on his earlier observations. However, the Court held that the Commissioner had no jurisdiction to decide the same matter again on a fresh revision application. The assessments were made as a protective measure, but the Court found that the assessments were not solely for safeguarding revenue interests.

Interpretation of Agreement for Work and Remuneration:
The Court analyzed the agreement between Pandit Deo Sharma and the petitioner, emphasizing that it was not akin to a deed of sub-partnership. The agreement was for work done by the petitioner in exchange for remuneration from Pandit Deo Sharma. The Court differentiated between the considerations for deduction claimed by Pandit Deo Sharma and the taxability of the income in the petitioner's hands.

In conclusion, the Court dismissed Writ Petitions related to the assessment years 1944-45 and 1945-46 but allowed the Writ Petition concerning the assessment year 1946-47. The Commissioner's order was quashed, directing a fresh determination of the earlier revision application for 1946-47, with the petitioner being awarded costs.