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TMI Blog1983 (12) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, in respect of the whole of the dividend income, including the actual dividend income received by him, irrespective of the fact that the question of allowing such concession or rebate in the computation of tax was not raised by the assessee in the original assessments. Thus, question No. 1 is answered in the affirmative. Question No. 2 referred to this court by the Appellate Tribunal is also answered in the affirmative and we hold that the Tribunal was competent to consider the question about the application of proper rate of rebate in respect of dividend income arising out of Part B States relating to the assessment years in question. As regards question No. 3, our answer is that the assessee was entitled to rebate on dividend income arising out of Part B States under Para. 6A of the aforesaid concession order for the assessment years 1953-54 and 1954-55 at the rate of 20% and 10% respectively. The assessees in both the cases are individuals, deriving their income from dividends on shares in various companies, besides income from other personal business. The assessment years in question in the case of Rangnath Bangur are 1953-54, 1954-55 and 1955-56 corresponding to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the dividends actually declared and received by the assessees, which were already subjected to tax in the original assessment orders. The assessees preferred appeals before the AAC in respect of the reassessment orders and sought to raise the question that rebate ought to have been allowed under Para. 6A of the Concessions Order not only on the deemed dividend income but also on the dividend income which bad actually been received by the assessees. However, the AAC did not allow the assessees to raise the aforesaid ground. Thereafter, the assessees filed appeals before the Income-tax Appellate Tribunal, Delhi Bench ' B ', Delhi (hereinafter called the Tribunal ) who remanded the matters to the AAC with the direction to dispose of the appeals afresh after considering the specific grounds raised by the assessees before him. In pursuance of the directions of the Tribunal, the AAC heard the appeals of the assessees again and held that the notional dividend income which had been included in the revised assessment orders should be grossed up and tax should be calculated on the entire deemed dividend income at the, concessional rate applicable to Part B States. The AAC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recomputed in respect of deemed dividend income only or in respect of deemed dividend income as well as actual dividend income ? In the case of Purshottam Dass Bangur, as the assessment relating to the year 1955-56 was not the subject-matter of these proceedings, only questions Nos. 2 and 3 mentioned above were referred by the two members of the Tribunal to the President. Learned President concurred with the view taken by both the members in respect of the third point and directed that rebate was allowable under Para. 6A of the Concessions Order in respect of the entire dividend income, including the actual dividend income received by the assessees, although the same was not allowed in the original assessment orders passed under s. 23(3) of the Act. In respect of points Nos. 1 and 2, the learned President agreed with the accountant member that the assessee was entitled to rebate under Para. 6A of the Concessions Order for the assessment year 1955-56 at the rate of 10% and further that the assessee was entitled to rebate for the assessment years 1953-54 and 1954-55 at the rate of 40% and 20% respectively. The Commissioner, Jaipur, requested the Tribunal, in the cases of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the rates applicable to his total income in the immediately preceding financial year, the same proportion as the amount of such inclusions bears to his total income. And where the total income of an assessee, not being a company, includes any income chargeable under the head 'Salaries' on which super-tax has been or might have been deducted under the provisions of sub-section (2) of section 18 of the Indian Income-tax Act, the super-tax payable by the assessee on that portion of his total income which consists of such inclusion shall be an amount bearing to the total amount of super-tax payable according to the rates applicable to his total income in the immediately preceding financial year, the same proportion as the amount of such inclusion bears to his total income : Provided further that the provisions of the second proviso to paragraph 6 of this Order shall apply to this paragraph as they apply to the said paragraph. It cannot be disputed and indeed it has not been disputed before us on behalf of the Revenue that the assessees were entitled to get benefit of the concession for rebate allowable under Para. 6A of the Concessions Order in respect of the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee containing all or any of the requirements, which may be included in a notice under sub-s. (2) of s. 22, and thereafter to proceed to assess or reassess such income, profits and gains of the assessee. Thus, as result of the reassessment proceedings under s. 34, the ITO has to assess or reassess the total income of the assessee, as directed by s. 23(3), and determine or redetermine the sum payable by him as tax, on the basis of such assessment or reassessment. Under the provisions of the Indian I.T. Act, 1922, the total income of the assessee is one and the tax levied is also one. In United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC), their Lordships of the Supreme Court quoted with approval the following observations of Viscount Dunedin in Salisbury House Estate Ltd. v. Fry [1930] 15 TC 266 at p. 306 : Now, the cardinal consideration in my judgment is that the Income-tax is only one tax, a tax on the income of the person whom it is sought to assess, and that the different Schedules are modes in which the statute directs this to be levied. In United Commercial Bank Ltd.'s case [1957] 32 ITR 688 (SC), their Lordships of the Supreme Court observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Concessions Order. The finality of the assessment order passed as result of the original assessment proceedings is wiped out, when the entire matter relating to determination of the total income and the tax payable in respect thereof by the assessee is reopened as a result of the reassessment proceedings under s. 34. The assessee cannot be estopped from claiming rebate in the course of reassessment proceedings or in the appeal against the reassessment order, merely on the ground that no such objection was raised by the assessee in the original assessment proceedings or in the appeal filed therefrom. We would, however, like to point out that if a question is expressly raised in the original assessment proceedings and is decided against the assessee or a ground is raised in the appeals against the original assessment order and the same is repelled by the AAC or by the Income-tax Appellate Tribunal in appeals against the original assessment order, then such a question cannot ordinarily be allowed to be raised again in the course of reassessment proceedings or in the appeals arising therefrom. But if no such question was raised in the original assessment proceedings or in the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commercial Taxes v. H. R. Sri Ramulu [1977] 39 STC 177 (SC), wherein it was observed as under (p. 180): Once an assessment is reopened, the initial order for assessment ceases to be operative. The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its Place the order made on reassessment. The initial order for reassessment cannot be said to survive, even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order. The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment (emphasis added). In the aforesaid cases, their Lordships of the Supreme Court drew attention to the procedure prescribed for making a reassessment. The assessing authority has to give a notice to the assessee calling upon him to produce his books of accounts and other documents. On receiving such notice, the assessee may appear before the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and obligation, apart from having jurisdiction, to include all items that escaped assessment notwithstanding the fact that he bad mentioned in the notice only some and complete the assessment as if the reassessment proceedings are de novo and afresh. The Andhra Pradesh High Court approved its earlier decisions in Pulavarthi Viswanadham v. CIT [1963] 50 ITR 463 (AP) and Anne Nagendram and Bomma Reddi Venkayya Co. v. CIT [1967] 66 ITR 46 (AP) and CIT v. Jeskaran Bhuvalka [1970] 76 ITR 128 (AP). The Full Bench of the Andhra Pradesh High Court dissented from the view taken by the Bombay High Court in New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. v. CIT [1977] 107 ITR 760 (Bom) and the decision of the Madras High Court in Veerappa Chettiar v. CIT [1973] 116 ITR (Mad) and held that the Bombay and Madras High Courts while deciding the aforesaid cases did not properly appreciate the true effect and import of the observations of their Lordships of the Supreme Court in Jaganmohan Rao's case [1970] 75 ITR 373 (SC) and as explained in the subsequent decisions in H. M. Esufali's case [1973] 32 STC 77 (SC) and H. R. Sri Ramulu's case [1977] 39 STC 177 (SC). In Sun Engineering W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 877 (Mad) and CIT v. B. Nagi Reddi [1983] 144 ITR 62 (Mad). It was held by their Lordships of the Madras High Court in the aforesaid cases that the earlier decision of that court in Veerappa Chettiar v. CIT [1973] 91 ITR 116 (Mad) was no longer good law as it would not stand consistently with the decision of the Supreme Court in V. Jaganmohan Rao's case [1970] 75 ITR 373 (SC). In Standard Motor Products of India Ltd.'s case [1983] 142 ITR 877 (Mad), their Lordships of the Madras High Court observed as under (p. 885) : From a combined reading of ss. 147, 148 and 139(2) of the Act, the following position emerges... The provisions of the Act should be applied as if the notice were a notice issued under s. 139(2) of the Act. Section 147 of course is subject to ss. 148 to 153 of the Act. The effect would then be that, when once a notice is issued on the above lines under s. 148 of the Act, the assessee would be called upon to file a fresh return as if it was return that would have to be filed in response to a notice under s. 139(2) of the Act. That, in turn, would mean that the assessee would be under an obligation to disclose his total income. It would not be open to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y cannot be said to be merely assessing the assessee on the escaped turnover, but it assesses him on his total estimated turnover. The decisions of the Bombay High Court in CIT v. A.D. Shroff [1957] 31 ITR 284 (Bom) and Kevaldas Ranchhoddas v. CIT [1968] 68 ITR 842 (Bom), were given before the judgment of their Lordships of the Supreme Court in V.Jaganmohan Rao's case [1970] 75 ITR 373 (SC). As the aforesaid two decisions of the Bombay High Court are inconsistent with the decisions of their Lordships of the Supreme Court in V. Jaganmohan Rao's case [1970] 75 ITR 373 (SC), H. M. Esufali's case [1973] 32 STC 77 (SC) and H. R. Sri Ramulu's case [1977] 39 STC 177 (SC), they can no longer be treated as good law. In a subsequent case, New Kaiser-I-Hind Spg. Wvg. Co.'s case [1977] 107 ITR 760 (Bom), their Lordships of the Bombay High Court agreed with the view taken by the Madras High Court in Veerappa Chettiar's case [1973] 91 ITR 116 (Mad), and did not agree with the view taken by the Andhra Pradesh High Court in Pulavarthi Viswanadham's case [1963] 50 ITR 463 (AP). However, as observed by the Full Bench of the Andhra Pradesh High Court in Subakaran G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sons' case [1973] 92 ITR 453 (All), expressed the view that on reassessment the entire assessment is not opened and that the controversy on reassessment is confined to matters which are relevant in respect of the income which had not been brought to tax during the course of the original assessment. It may be observed with great respect that the decision of the Allahabad High Court in Sir Shadi Lal Sons'case [1973] 92 ITR 453 (All), is inconsistent with the decisions of their Lordships of the Supreme Court in V. Jaganmohan Rao's case [1970] 75 ITR 373 (SC), H. R. Sri Ramulu's case [1977] 39 STC 177 (SC) and H. M. Esufali's case [1973] 32 STC 77 (SC), and cannot be regarded as laying down good law. It may also be pointed out that a divergent view was subsequently expressed by their Lordships of the Allahabad High Court in E. Hill Co. (Pvt.) Ltd. v. CIT [1980] 122 ITR 630 (All), wherein, following the decision of their Lordships of the Supreme Court in V. Jaganmohan Rao's case [1970] 75 ITR 373, it was held that once an assessment is reopened, the entire assessment was at large. But the earlier decision of that court in Sir Shadi Lal Sons' case [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, as also in respect of the deemed dividend income irrespective of the fact that the question of allowing such concession or rebate in the computation of the amount of tax was not raised by the assessee at the time when the original assessment order was passed or in the appeal therefrom. In our view, the ITO was competent at the time of passing the reassessment order to consider the question of allowing rebate as also about the application of the proper rate of rebate in respect of the dividend income arising to the assessee from Part B States during the assessment years in question. The Appellate Tribunal, while hearing an appeal against the reassessment order, was likewise competent to consider the aforesaid questions in the same manner as the said question could have been considered by the ITO at the time of passing the original assessment order. On account of the aforesaid reasons, we have answered the first two questions referred to this court in the affirmative and in favour of the assessee. The actual dividend income received by the assessees was the subject matter of the original assessment proceedings and at that time the benefit of the concession allowable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o them. Section 2(3)(a) of the Finance Act of each of the years 1952, 1953, 1954 and 1955 provided that in case the total income of an assessee included income from dividends, in respect of which the assessee himself would be deemed to have paid income-tax imposed under the Act by virtue of the provisions of s. 49B of the 1922 Act, such assessee shall be deemed to have paid income-tax on that part of the total income at a rate applicable to the total income of the assessee in the immediately preceding financial year. Thus, in respect of the dividend income or deemed dividend income, included in the total income of the previous year relatable to the assessment year 1955-56., the rate of tax prescribed by the Finance Act of 1954 would be applicable. Similarly for the assessment years 1953-54 and 1954-55, so far as the dividend income is concerned, the rates fixed by the Finance Acts of 1952 and 1953 respectively would be applicable. In Para. 3(iii) of the Concessions Order, the expression Indian rate of tax has been defined as the rate determined by dividing the amount of income-tax and super-tax payable in the taxable territories on the total income for the year in questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y previous year of an assessee ending after March 31, 1949, which have not been assessed to tax under the State law would be subjected to tax under the Indian I.T. Act, at a concessional rate. Paras. 5 and 6 of the Concessions Order cover the first two assessment years after integration, namely, 1950-51 and 1951-52. Para. 6A covers the period of the three subsequent assessment years, namely, 1952-53, 1953-54 and 1954-55, and it provides that rebate shall be allowed during the aforesaid three assessment years at the rate of 40%, 20% and 10% respectively of the Indian rates of tax. Thus, in the assessment year 1952-53, the income, profits and gains accruing or arising in the territories comprised within the State of Rajasthan were chargeable to tax at the Indian rates of tax, subject to rebate being allowed at the rate of 40% thereof. In the following previous year corresponding to the assessment year 1953-54, the income, profits and gains accruing or arising to an assessee in the State of Rajasthan, were chargeable to tax at the Indian rate of tax, but rebate at the rate of 20% thereof would be allowed to the assessee. In the same way, in respect of the assessment year 1954-55, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Act of that year, while salaries, interest on securities and dividends were taxed at the rate prescribed in the Finance Act of the preceding year. As tax was deducted at source in respect of salaries, interest on securities and dividends at the time of accrual of such income, the tax could only be charged at the rate prescribed by the Finance Act of the preceding year for the simple reason that the rate of tax applicable to the assessment year in question would only be known on the coming into force of the new Finance Act for that year. It may be that the tax may be charged on dividend income at a rate prescribed by the Finance Act of the previous year, but that would not make the benefit of the provisions of the concession or rebate allowable under Para. 6A to be applicable to dividend income assessable in the assessment year 1955-56. It is undoubtedly true that the dividend income assessable in the assessment year 1952-53 would be charged to tax at the rate prescribed in the Finance Act of 1951 and similarly the dividend income assessable in the assessment year 1953-54 would be subject to tax at the rate prescribed by the Finance Act of 1952. Likewise dividend income asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the three assessment years specifically referred to therein as ending on 31st day of March of the years 1953, 1954 and 1955 and clause (a) makes it clear that the rebate at the rate of 40% was applicable to the income, profits and gains accruing or arising in the State of Rajasthan to the assessee for the assessment year ending on March 31, 1953, which refers to the previous year relatable to the assessment year 1952-53. The proviso, as mentioned above, merely makes the provisions of s. 2(3)(a) of the Finance Act applicable in the calculation of rebate or concession relating to dividend income or deemed dividend income. The President of the Appellate Tribunal has referred in his order to the fact that rebate was neither claimed by the assessees nor allowed in respect of the income from dividends for the assessment year 1952-53. However, the mere fact that the assessees failed to claim rebate or concession under Para. 6A, in respect of dividend income assessed to tax in the assessment year 1952-53, would not entitle the assessees to avail of the benefit of the concession provided in Para. 6A of the Concessions Order in respect of the dividend income assessed in the assessment year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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