1970 (11) TMI 6 - HC - Income Tax

Amounts not assessed in the original assessment - reassessment u/s 34(1)(b) - since AO not formed any definite opinion at the stage of the original assessment, reassessment is permissible

Issues Involved:
1. Legality of reopening the assessment for the year 1957-58 under section 34(1)(b) of the Income-tax Act, 1922.

Detailed Analysis:

1. Legality of Reopening the Assessment for 1957-58 under Section 34(1)(b):

Background:
The assessee, a private limited company, had taken over the assets and liabilities of two concerns under a scheme of amalgamation. This resulted in a capital reserve of Rs. 5,61,397, which was initially treated as the income of the assessee for the assessment year 1954-55. The Appellate Assistant Commissioner (AAC) later excluded this amount from the assessment for that year. The Income-tax Officer (ITO) subsequently conducted further enquiries and determined that Rs. 2,62,276-10-8 was realized during the accounting year relevant to the assessment year 1957-58. Consequently, the ITO reopened the assessment for 1957-58 under section 34(1)(b).

Contentions of the Assessee:
The assessee contended that the reopening was illegal because:
- All relevant facts were available to the ITO at the time of the original assessment.
- The ITO had deliberately omitted to include the amount in the original assessment for 1957-58.
- Therefore, there was no new information that justified the reopening under section 34(1)(b).

Appellate Assistant Commissioner's Decision:
The AAC upheld the assessee's contention without delving into the merits of whether the amount constituted income for 1957-58, setting aside the reassessment.

Tribunal's Findings:
The department appealed to the Income-tax Appellate Tribunal, which held that:
- The assessee had furnished complete information by June 22, 1961.
- The ITO did not comprehend the significance of this information and was under the impression that the amount should be assessed in 1955-56.
- Even if all relevant information was available at the time of the original assessment, the ITO could still reopen the assessment under section 34(1)(b).

Legal Precedents and Interpretation:
The judgment referenced various High Court decisions and Supreme Court rulings, notably:
- The Supreme Court in *Maharaj Kumar Kamal Singh v. Commissioner of Income-tax* and *A. Raman & Co.* clarified that information leading to the belief that income has escaped assessment must come into the ITO's possession subsequent to the original assessment.
- Divergent views from different High Courts on what constitutes "information" under section 34(1)(b) were discussed, indicating a broad interpretation by some courts and a stricter one by others.

High Court's Analysis:
The High Court applied the principles laid down by the Supreme Court. The crucial question was whether the ITO had considered all relevant facts and concluded that the amount was not assessable in 1957-58 at the time of the original assessment. The Tribunal's findings indicated:
- The ITO had all relevant facts but did not comprehend their significance due to their complexity.
- The ITO did not form a definite opinion at the original assessment stage.
- The subsequent reassessment was based on a better understanding of the facts and consultation with superiors, not merely a change of opinion.

Conclusion:
The High Court concluded that the reopening of the assessment was permissible under section 34(1)(b) as it did not amount to a mere change of opinion. The question referred to the court was answered in the affirmative, in favor of the Revenue and against the assessee. The assessee was ordered to bear the costs of the reference proceedings, with counsel's fee fixed at Rs. 250.

Final Judgment:
- Question answered in the affirmative.

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