1967 (9) TMI 21 - HC - Income Tax

ITO assessing income of a person which Tribunal on appeal held that it was not income of that person. Reassessment by ITO of the person who filed the return - Whether reassessment was valid - Held, yes

Summary

Issues Involved:
1. Validity of proceedings for the assessment year 1952-53 under section 34(1)(a) of the Income-tax Act.
2. Validity of proceedings for the assessment year 1953-54 under section 34(1)(b) of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Validity of proceedings for the assessment year 1952-53 under section 34(1)(a) of the Income-tax Act:

The primary issue was whether the proceedings for the assessment year 1952-53 were validly initiated under section 34(1)(a). The facts revealed that the assessee, who had purchased a medical store, filed returns signed by a power of attorney agent. The Income-tax Officer initially accepted these returns but later argued that the returns were not valid as they were not signed by the assessee himself.

The Tribunal held that the returns were accepted as valid by the Income-tax Officer initially, and thus, it was not open to the department to contend otherwise. The court agreed, noting that any irregularities in the filing were ignored by the department, and the returns were accepted for further assessment. Therefore, the first question was answered in the negative, indicating that the proceedings under section 34(1)(a) were not validly initiated.

2. Validity of proceedings for the assessment year 1953-54 under section 34(1)(b) of the Income-tax Act:

The second issue was whether the proceedings for the assessment year 1953-54 were validly initiated under section 34(1)(b). The Income-tax Officer had reason to believe that the assessee's income had escaped assessment based on the Tribunal's decision, which held that the income from the medical stores belonged to the assessee and not Mehta.

The Tribunal initially held that the action under section 34(1)(b) was not justified as it was based on a change of opinion rather than new information. However, the court analyzed the conditions under section 34(1)(b), which require that the Income-tax Officer must have information that comes into his possession subsequent to the original assessment, leading to the belief that income has escaped assessment.

The court referred to several case laws, including *Maharaj Kumar Kamal Singh v. Commissioner of Income-tax* and decisions from the Allahabad and Madras High Courts, which established that information could include a decision of a higher Tribunal on the same set of facts. The court concluded that the Tribunal's decision constituted information that led the Income-tax Officer to realize an error in the original assessment, thus justifying the proceedings under section 34(1)(b).

Therefore, the second question was answered in the affirmative, indicating that the proceedings for the assessment year 1953-54 under section 34(1)(b) were validly initiated.

Conclusion:

The court concluded by answering the first question in the negative, indicating that the proceedings under section 34(1)(a) for the assessment year 1952-53 were not validly initiated. The second question was answered in the affirmative, validating the proceedings under section 34(1)(b) for the assessment year 1953-54. The assessee was ordered to pay the costs of the department.