1984 (3) TMI 205 - AT - Income Tax

Issues Involved:
1. Reopening of assessment under Section 147 read with Section 148 of the Income-tax Act, 1961.
2. Assessment of value of perquisite for personal use of company cars by the director.
3. Applicability of Section 2(24)(iv) and Section 17(2) of the Income-tax Act, 1961.
4. Relevance and applicability of past judgments, specifically CIT v. A.R. Adaikappa Chettiar and M.M. Metha v. CIT.

Issue-wise Detailed Analysis:

1. Reopening of Assessment:
The assessee's original assessment for the year 1968-69 was completed on 19-2-1969. The ITO later received information that the assessee, as a director of Saroja Mills, used company cars for personal purposes without disclosing the value of this benefit. Consequently, the ITO reopened the assessment with the Commissioner's sanction on 15-10-1976 under Section 147 read with Section 148 of the Income-tax Act, 1961, to assess the escaped income.

2. Assessment of Value of Perquisite:
The ITO added Rs. 9,097 to the assessee's income for the personal use of company cars, citing that similar additions were confirmed in the assessee's case for the year 1970-71. The Commissioner (Appeals) upheld this addition, differentiating it from the case of CIT v. A.R. Adaikappa Chettiar, where unauthorized use by managing agents did not attract tax under Section 2(6C)(iii) of the Indian Income-tax Act, 1922. In this case, the use was authorized by the company, and the company took no action against the director, implying authorization.

3. Applicability of Section 2(24)(iv) and Section 17(2):
The combined reading of Section 2(24)(iv) and Section 17(2) of the Income-tax Act, 1961, along with Rule 3 of the Income-tax Rules, 1962, was pivotal. These sections define 'income' and 'perquisite', respectively. The Tribunal concluded that the use of company cars by the director constitutes a perquisite, as the company did not oppose the use, and the articles of the company did not prohibit it. Thus, the value of this benefit should be included in the assessee's income.

4. Relevance and Applicability of Past Judgments:
The Tribunal distinguished the case from CIT v. A.R. Adaikappa Chettiar, where unauthorized use by managing agents did not lead to tax liability. Here, the use of cars by the director was deemed authorized due to the company's inaction and the articles of association. The Tribunal also found the case of M.M. Metha v. CIT distinguishable, as the facts and circumstances differed. The Tribunal emphasized that the consistent past assessment of the perquisite value without challenge by the assessee further supported the current assessment.

Conclusion:
The Tribunal confirmed the Commissioner (Appeals)'s order, dismissing the appeal. The consistent use of company cars by the director without opposition from the company was deemed authorized, making the value of such use a taxable perquisite under the Income-tax Act. The plea of unauthorized use was considered an afterthought, given the historical acceptance of similar assessments by the assessee. The appeal was dismissed, and the impugned order was upheld.

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