1969 (6) TMI 6 - HC - Income Tax

Correct rate of tax applicable - Whether the assessee s income for nine months ended on March 31, 1950, could have been rightly assessed at the rate applicable for twelve months income - Held, no

Summary

Issues:
1. Refusal to entertain additional ground of appeal regarding correct rate of tax.
2. Assessment of income for nine months at rate applicable for twelve months.
3. Availability of material to support turnover assessment.

Analysis:
1. The court addressed the issue of refusing to entertain the additional ground of appeal regarding the correct rate of tax. The counsel agreed that this question was encompassed within another issue directed by the court to be referred, making a separate decision unnecessary.

2. The main issue revolved around whether the assessee's income for nine months could be rightly assessed at the rate applicable for twelve months. The court referred to the Supreme Court judgment in Esthuri Aswathaiah v. Commissioner of Income-tax, where it was established that the length of the "previous year" need not be twelve months and the Income-tax Officer cannot vary the rate at which the income of the "previous year" is assessed once it is determined.

3. The court analyzed the relevant provisions of the Income-tax Act and the facts of the case. The Income-tax Officer had granted consent for a change in the "previous year" to cover a period of nine months, but imposed a condition to assess the income at the rates applicable for twelve months. The court held that the Officer exceeded his authority by imposing this condition, as the power to vary the rate of assessment is a legislative power and cannot be exercised by the Officer.

4. It was argued that the proviso to the Act empowered the Income-tax Officer to impose conditions as deemed fit, including assessing income at rates applicable for twelve months if the "previous year" falls below that duration. However, the court clarified that this discretion is limited to the period of the "previous year" and cannot extend to altering the rate of assessment beyond what is specified in the Finance Act.

5. Ultimately, the court answered the second question in favor of the assessee, stating that the income for the nine months ended on March 31, 1950, should be taxed only at the rates applicable for that specific period. The third question was answered in favor of the revenue due to the concession made by the assessee's counsel. The court ordered the respondent to pay the costs of the assessee along with the advocate's fee.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the court's reasoning in arriving at its decision.