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TMI Blog1976 (8) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... od of computation permitted in rule 33 of the Income-tax Rules and followed in the original assessment, and adopt an alternative method of computation also permitted under the said Rules (corresponding to rule 10 of the Income-tax Rules, 1962) ? " The matter relates to the assessment year 1959-60, the corresponding financial year for which ended on March 31, 1959. The assessee is a non-resident company carrying on business as construction engineers. The Income-tax Officer made the original assessment on May 31, 1960, on a total income of Rs. 21,49,169. On November 5, 1962, the Income-tax Officer initiated proceedings under section 147(b) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and completed the assessment on February 29, 1964, on a total income of Rs. 69,85,097. At the time of the original assessment the assessee filed the return of income along with the auditor's certificate of the trading results of the various contracts. One of those contracts was in respect of work at Durgapur within the Hindustan Steel Ltd. In respect of that work the assessee filed a provisional estimate of income which was arrived at "by calculating the income that could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome to be Rs. 22,23,231 and that the assessee had no objection to such a revision. In appeal before the Tribunal the department urged that the Appellate Assistant Commissioner was not justified in holding that the Income-tax Officer (i) had no jurisdiction to start proceedings under section 147(b) of the Act; and (ii) that the Appellate Assistant Commissioner had erred in allowing deductions in the income of the assessee. The Tribunal held on the first ground that proceedings under section 147(b) had been validly initiated. Regarding the second ground, the Tribunal observed in agreement with the Appellate Assistant Commissioner that the mode of computation adopted in the original assessment was one permitted under rule 33 of the Income-tax Rules, 1922, and that the mode adopted in reassessment was another alternative method. The Tribunal held that both the methods being permissible, it could not be said that any mistake was committed in computing the income at the time of the original assessment on a particular basis adopted with reference to rule 33. In the opinion of the Tribunal, the Income-tax Officer could not in reassessment proceedings depart from the method of computat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to income-tax either in his name or in the name of his agent. According to sub-section (3) of section 42 in the case of a business of which all the operations are not carried out in the taxable territories, the profits and gains of the business deemed under this section to accrue or arise in the taxable territories shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territories. The assessee-respondent in the present case carried on business as construction engineers both in India and other parts of the world. The Income-tax Officer, it seems, found that the provisions of section 42 of the Act of 1922 did not provide sufficient criteria for computing the profits and gains of business deemed to accrue or arise in India. Resort was accordingly had to rule 33 of the 1922 Rules. The above rule has been made to meet such an eventuality, and reads as under: " In any case in which the Income-tax Officer is of opinion that the actual amount of the income, profits or gains accruing or arising to any person residing out of the taxable territories whether directly or indirectly through or from any business c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with which we are concerned is whether it would be a case of income escaping assessment if the Income-tax Officer adopts a method of computation which is permissible under the law but which method results in lower tax liability compared to the other method which too is permissible in law. According to the leaned Additional Solicitor-General, the adoption of a method even though permitted by rule 33 which results in lower tax liability of the assessee compared to the other method mentioned in the rule would warrant the conclusion that income has escaped assessment and as such section 147 of the Act of 1961 would get attracted. After giving the matter our earnest consideration, we find it difficult to accept the above contention. It was open, as already mentioned, to the Income-tax Officer at the time of making the original assessment, to adopt one of the three methods mentioned in rule 33 for computing the taxable income of the assessee. Discretion was vested by rule 33 in the Income-tax Officer for the purpose of making his choice of the methods, and the same was to be exercised in a proper and judicious manner. There is nothing before us to show that the discretion was not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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