1973 (5) TMI 16 - HC - Income Tax

Whether on the facts and in the circumstances of the case the income from the house properties at 53A and 53B Gariahata Road Calcutta was rightly included in the total income of the assessee under section 16(3)(a)(iii) of the Indian Income-tax Act 1922 ? - Whether on the facts and in the circumstances of the case the Tribunal could in law uphold the assessments for the assessment years 1954-55 and 1955-56 on the notices under section 34(1)(a) with reference to the powers under section 34(1)(b) of the Indian Income-tax Act 1922 ? - both the questions are answered in the affirmative and in favour of the revenue

Issues Involved:
1. Inclusion of income from house properties under section 16(3)(a)(iii) of the Indian Income-tax Act, 1922.
2. Validity of assessments for the assessment years 1954-55 and 1955-56 under section 34(1)(a) with reference to section 34(1)(b) of the Indian Income-tax Act, 1922.

Issue-wise Detailed Analysis:

1. Inclusion of Income from House Properties:

The primary question was whether the income from the house properties at 53A and 53B, Gariahata Road, Calcutta, was rightly included in the total income of the assessee under section 16(3)(a)(iii) of the Indian Income-tax Act, 1922. This issue had already been addressed for the assessment year 1956-57 in Income-tax Reference No. 42 of 1963, where the court had answered in the affirmative and in favor of the revenue. Consequently, for the assessment years 1954-55, 1955-56, 1957-58, and 1958-59, the court reiterated that the inclusion of the income from the said properties in the assessee's total income was proper under section 16(3).

2. Validity of Assessments under Section 34(1)(a) with Reference to Section 34(1)(b):

For the assessment years 1954-55 and 1955-56, the question was whether the Tribunal could uphold the assessments made under section 34(1)(a) with reference to the powers under section 34(1)(b). The background facts reveal that the Income-tax Officer issued notices under section 34(1)(a) to include income from properties standing in the name of the assessee's wife, based on the applicability of section 16(3). These assessments were completed within the statutory period.

The Tribunal had previously considered similar issues and held that there was no omission by the assessee to disclose material facts, thus proceedings under section 34(1)(a) were not justified. However, the Tribunal noted that section 34(1)(b) might have been applicable but was barred by limitation for earlier years. For the assessment years 1954-55 and 1955-56, the Tribunal observed that the proceedings were commenced and completed within four years, supporting the assessments under section 34(1)(b).

The court examined whether the Tribunal had jurisdiction to uphold reassessments under section 34(1)(b) when initiated under section 34(1)(a). It was argued that sections 34(1)(a) and 34(1)(b) provided distinct jurisdictions for different contingencies, and one could not be converted into the other by the Tribunal. The court referred to the Supreme Court decision in Johri Lal v. Commissioner of Income-tax, which emphasized that the formation of the required belief by the Income-tax Officer under section 34(1)(a) was mandatory and failure to do so would invalidate the proceedings.

The court clarified that section 34 was a machinery section, not a charging section, and dealt with the reopening of assessments under different contingencies. It was noted that while clauses (a) and (b) of section 34(1) were mutually exclusive from one perspective, action under one clause could be justified under the other if the conditions were met. The court agreed with the view that if action under section 34(1)(a) could be justified under section 34(1)(b), the Tribunal could uphold the reassessment accordingly.

In conclusion, the court held that the Tribunal had jurisdiction to uphold the reassessments under section 34(1)(b) even if the Income-tax Officer had initially acted under section 34(1)(a), provided the conditions for section 34(1)(b) were met. Therefore, the second question was answered in the affirmative and in favor of the revenue.

Conclusion:

Both questions were answered in the affirmative and in favor of the revenue. The income from the house properties was rightly included in the assessee's total income under section 16(3)(a)(iii), and the assessments for the years 1954-55 and 1955-56 were valid under section 34(1)(b) despite being initiated under section 34(1)(a). Each party was ordered to bear its own costs.

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