1982 (2) TMI 20 - HC - Income Tax

Summary

Issues:
1. Validity of proceedings under section 147(b) for the assessment year 1962-63.
2. Deduction of consumers' contributions made prior to January 1961 for computing the written down value for the assessment years 1962-63 and 1963-64.

Analysis:

Issue 1: Validity of proceedings under section 147(b) for the assessment year 1962-63
The High Court examined the legality of the action taken under section 147(b) of the Income Tax Act, 1961. The court emphasized that for reopening an assessment under section 147(b), the Income Tax Officer (ITO) must have a reason to believe that income chargeable to tax had escaped assessment due to information acquired after the original assessment order was passed. The court noted the controversy over the nature of the required information but clarified that the ITO must possess information leading to a belief that income had escaped assessment. The court highlighted that a mere change of mind by the ITO is insufficient to trigger action under section 147(b). The court analyzed arguments presented by both parties, where the Commissioner argued that the ITO had not considered consumers' contributions in the original assessment, justifying the reopening. However, the court found that the ITO failed to provide any specific information or basis for the belief that income had escaped assessment. Consequently, the court concluded that the order of reopening the assessment under section 147(b) was invalid, answering question 1 against the Commissioner.

Issue 2: Deduction of consumers' contributions for computing the written down value
Regarding the deduction of consumers' contributions made prior to January 1961 for computing the written down value, the court addressed this issue separately for the assessment years 1962-63 and 1963-64. For the assessment year 1962-63, the court deemed the question academic due to the decision on the first issue. However, for the assessment year 1963-64, the court referred to a previous Division Bench decision that concluded against the assessee. The court cited the decision in CIT v. Bassein Electric Supply Co. Ltd. to support its ruling, answering question 2 in the affirmative and against the assessee for the assessment year 1963-64.

In conclusion, the High Court ruled against the Commissioner on the validity of proceedings under section 147(b) for the assessment year 1962-63, finding the order of reopening the assessment invalid. The court also decided in favor of the revenue authority regarding the deduction of consumers' contributions for computing the written down value for the assessment year 1963-64 based on a previous court decision.