|
Advanced Search Options
Case Laws
Showing 61 to 80 of 112 Records
-
1970 (4) TMI 52
Rejection of method of accounting adopted by assessee - was there any material on the basis of which it can reasonably be said that the method of accounting employed is such that the income, profits and gains cannot properly be deduced therefrom
-
1970 (4) TMI 51
Issues:
1. Whether the amount received by the assessee-company as acquisition-compensation is a capital receipt?
Analysis:
The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, initiated by the revenue. The primary issue is whether the amount of Rs. 95,620 received by the assessee-company as acquisition-compensation for a portion of leased land constitutes a capital receipt. The assessee, engaged in pharmaceutical manufacturing, had leased land for factory construction. The acquisition of a part of the land by the Municipal Corporation of Greater Bombay led to the compensation payment. The Tribunal ruled in favor of the assessee, considering the compensation as a capital receipt. The agreement between the parties outlined the rights and obligations in case of land acquisition, emphasizing the continuation of full rent payment by the lessee despite land loss.
The judgment delves into the details of the lease agreement, highlighting the provisions related to potential land acquisition scenarios. The agreement specified the treatment of compensation in case of a set-back or acquisition, indicating an interim arrangement for compensation monies. It was noted that the compensation served to offset the lessee's continued rent liability for the acquired land portion. The court emphasized that the compensation was not a result of the assessee's trade activity but rather a capital receipt due to the specific circumstances outlined in the lease agreement.
The court dismissed the revenue's arguments that the compensation should be treated as profit subject to taxation. The revenue's contentions regarding the foreseeability of the acquisition and its impact on the capital asset were refuted. The court upheld the Tribunal's decision, emphasizing that the compensation amount was rightly considered a capital receipt. The judgment concluded by affirming the decision in the affirmative, with the revenue directed to bear the assessee's costs. The court's detailed analysis centered on the specific provisions of the lease agreement, the nature of the compensation received, and the absence of evidence supporting the revenue's claims regarding the receipt's taxability as profit.
-
1970 (4) TMI 50
Issues:
1. Whether the enhancement in the value of assets due to revaluation in 1948 should be considered in determining the net wealth for the assessment year 1957-58.
2. If the enhanced value is to be included, should it be the 1948 value or reduced by depreciation in subsequent years.
3. Whether a provision for tax liability can be deducted in computing net wealth even if assessments are pending.
Analysis:
Issue 1:
The High Court held that the enhanced value of assets from the 1948 revaluation should be considered in determining net wealth. This decision was based on the principle that the Wealth-tax Officer was entitled to consider the increased value of assets based on revaluation. The court referred to a similar case where the Supreme Court upheld the Wealth-tax Officer's right to use the balance-sheet value unless proven otherwise. Thus, the court answered the first question in the affirmative.
Issue 2:
Regarding the second question, the court ruled that if the enhanced value of assets is considered for wealth tax computation, depreciation should also be allowed on this enhanced value in subsequent years. This decision was supported by the rationale that the true value of an asset should account for depreciation over time. The court cited various cases where depreciation on asset value was allowed under section 7(2) of the Wealth-tax Act. The court concluded that the value to be included in net wealth should be the 1948 value reduced by depreciation in subsequent years, considering any reduction due to asset demolition in 1953.
Issue 3:
On the third issue, the court addressed whether a provision for tax liability can be deducted in computing net wealth. The court referred to the definition of "debt owed" under the Wealth-tax Act and held that a provision for tax liability is deductible as a present liability, following previous Supreme Court decisions. The court emphasized that tax liability is considered a present debt even if the tax is payable after quantification. Therefore, the court answered the third question in the affirmative.
In conclusion, the High Court's judgment clarified that the enhanced value of assets from a 1948 revaluation should be considered for wealth tax calculation, with depreciation allowed on this value in subsequent years. Additionally, a provision for tax liability can be deducted in computing net wealth as a present liability. The court's decision was based on legal principles and previous court rulings, providing a comprehensive analysis of the issues raised in the case.
-
1970 (4) TMI 49
Issues:
1. Estate duty assessment on gifts made by deceased.
2. Validity of notice issued under the Gift-tax Act to only one legal representative.
3. Failure of Gift-tax Officer to enquire about all legal representatives.
Analysis:
1. The judgment dealt with the estate duty assessment on gifts made by the deceased. Late Siddappa had made gifts of Rs. 1,38,000 to specific individuals before his death. The Assistant Controller of Estate Duty included this amount in the estate, leading to a dispute. The Appellate Controller of Estate Duty allowed the appeal, but the department appealed to the Income-tax Appellate Tribunal, which upheld the validity of the gifts. The Tribunal considered the absence of reference to the cash gift in Siddappa's will as a basis for excluding it from the estate. This issue formed the background for the subsequent legal proceedings.
2. The petitioner, as one of the legal representatives of Siddappa, challenged the notice issued by the Gift-tax Officer under the Gift-tax Act. The petitioner argued that the notice was invalid as it was only served on her and not on all legal representatives. The Gift-tax Officer's counter-affidavit was deemed unsatisfactory as it failed to acknowledge the existence of other legal representatives, despite clear indications in estate duty proceedings and the will itself. The court emphasized the necessity to serve notices on all legal representatives when taking action under the Act to ensure fair representation and compliance with legal provisions.
3. The court delved into the failure of the Gift-tax Officer to conduct a proper enquiry to identify all legal representatives of the deceased. Citing relevant sections of the Gift-tax Act and the Civil Procedure Code, the court highlighted the obligation to notify all legal representatives in such matters. Referring to precedent cases, including decisions by the Supreme Court and the High Court, the judgment emphasized the importance of diligent enquiry to ascertain all legal representatives. The court concluded that the petitioner was not the sole legal representative and that the Gift-tax Officer's oversight rendered the notices invalid. As a result, the court allowed the writ petition in favor of the petitioner, emphasizing the necessity for due diligence in identifying and notifying all legal representatives in such cases.
-
1970 (4) TMI 48
Issues Involved:
1. Taxability of Rs. 58,275 under section 4(1)(b)(ii) read with the second proviso of the Indian Income-tax Act, 1922.
2. Nature of remittances: Whether they were capital or business profits.
3. Whether remittances were profits of the previous year ending on 31st March, 1958.
4. Whether the remittances were brought into or received in the taxable territories by the assessee himself.
Issue-wise Detailed Analysis:
1. Taxability of Rs. 58,275 under section 4(1)(b)(ii) read with the second proviso:
The Income-tax Appellate Tribunal held that Rs. 58,275 in the hands of the assessee was chargeable to tax under section 4(1)(b)(ii) read with its second proviso. The Tribunal's decision was based on the fact that the assessee was "resident but not ordinarily resident" during the relevant previous year, and the provisions of section 4(1)(b)(ii) would apply if the amount sought to be taxed was his income, profits, or gains which accrued or arose to him outside the taxable territories during the previous year ending on 31st March, 1958. The second proviso would exclude the amount if it was brought into or received in the taxable territories during the same previous year.
2. Nature of remittances: Whether they were capital or business profits:
The assessee contended that the remittances were either capital accumulated in the past or profits accrued in earlier years, not the previous year in question. The affidavit dated 14th March, 1958, stated that the assessee had significant capital and assets in Hongkong and was only involved in business in New York since 1948. The Tribunal, however, found that in the absence of other data, the department was justified in holding that the remittances represented profits accruing to the assessee outside the taxable territories during the year of account.
3. Whether remittances were profits of the previous year ending on 31st March, 1958:
The Tribunal's order indicated that the amounts of the drafts were considered to be business profits accrued during the previous year itself. The assessee argued that profits of a business cannot be remitted in the same year they arose, as profits can only be ascertained after the year-end. This principle was supported by the judgment in Shankar Iranna Gumdel v. Commissioner of Income-tax. The Tribunal's findings, however, suggested that the remittances were treated as current year profits.
4. Whether the remittances were brought into or received in the taxable territories by the assessee himself:
The assessee argued that the amounts were not brought into or received in the taxable territories by himself. The Tribunal's findings indicated that the drafts were sent from Singapore to India and credited to the assessee's accounts in India. The Tribunal confirmed the department's view that the remittances were profits accruing outside the taxable territories and brought into India during the previous year.
Conclusion:
The High Court concluded that the Tribunal's finding that the remittances were business profits accruing during the previous year was a finding of fact. Based on the principle laid down in Shankar Iranna Gumdel's case, such profits were not liable to be taxed in the same year they arose. Therefore, the question was answered in the negative, and the Commissioner was ordered to pay the assessee's costs.
-
1970 (4) TMI 47
Issues Involved:
1. Whether the sum of Rs. 25,000 contributed by the assessee-company to the welfare fund constitutes capital expenditure.
2. Whether the expenditure of Rs. 25,000 is deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922.
Issue-wise Detailed Analysis:
1. Capital Expenditure:
The primary issue revolves around whether the contribution of Rs. 25,000 by the assessee-company to the welfare fund is considered capital expenditure. The tax authorities and the Appellate Tribunal held that the expenditure was capital in nature, referencing the case of Atherton v. British Insulated and Helsby Cables Ltd. The Tribunal noted that the fund's existence hinged on the company's contribution, which was the foundation or nucleus of the fund, not the Rs. 581 collected from employees. The Tribunal also highlighted the company's control over the fund, evidenced by its power to nominate trustees and the chairman, who was the managing director. The Tribunal concluded that the expenditure created an enduring asset, thus qualifying as capital expenditure.
2. Deductibility under Section 10(2)(xv):
The assessee-company's advocate argued that the expenditure was for commercial expediency, aimed at benefiting the employees and fostering better relations. The advocate emphasized that the Rs. 25,000 was insufficient to create a lasting asset and was a voluntary contribution, not tied to any existing liability. The scheme of the fund allowed for the corpus to be utilized, suggesting that the expenditure did not create a lasting advantage. The advocate relied on the case of Commissioner of Income-tax v. New India Assurance Co. Ltd., where a similar expenditure was deemed deductible.
In response, the revenue's advocate reiterated the Tribunal's reasoning, asserting that the expenditure aimed to establish a fund offering lasting benefits to employees, thus securing a contented staff. The advocate argued that the expenditure was the nucleus for starting the fund, and the employees' contribution was negligible.
The court examined the fund's scheme, noting that the rules and regulations allowed for the corpus to be spent on various beneficial purposes, not just the income earned. This indicated that the expenditure was not intended to create a lasting asset. The court referenced the New India Assurance case, where a similar contribution was deemed deductible as it was made out of commercial expediency and not to meet any existing liability.
The court found the principles from Atherton's case inapplicable to the present case, as the facts were more aligned with the New India Assurance case. The court concluded that the expenditure was made for commercial expediency and was not capital expenditure. Therefore, the expenditure was deductible under section 10(2)(xv).
Conclusion:
The court answered the question in the negative, ruling that the expenditure of Rs. 25,000 was not capital expenditure and was deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922. The Commissioner of Income-tax was ordered to pay costs.
-
1970 (4) TMI 46
Issues:
Validity of notice under section 148 of the Income-tax Act, 1961 for reassessment of income for the assessment year 1952-53.
Analysis:
The petitioner challenged the validity of a notice issued under section 148 of the Income-tax Act, 1961, for reassessment of income for the assessment year 1952-53. The petitioner contended that all material facts necessary for the assessment were disclosed during the original assessment and there was no omission or failure on their part. The notice was issued more than eight years after the relevant assessment year, and the satisfaction of the Central Board of Revenue was obtained and recorded as required by section 151 of the Income-tax Act, 1961.
Verification Objections:
Objections were raised regarding the verification of the petition and the reliability of the affidavit-in-opposition. The petitioner's accountant verified the petition, affirming his knowledge of the case. The respondent, Income-tax Officer, provided detailed reasons for the reassessment nearly a year before initiating action under section 147, which was considered satisfactory by the court. The court found no material defect in the petition's verification and no grievance regarding the statements in the affidavit-in-opposition.
Contention and Conclusion:
The petitioner argued that as the relevant accounting year ended before the alleged cash credits, there was no obligation to disclose them during the assessment year in question. However, if the credits were found to be undisclosed income, they should be considered for assessment in the relevant financial year. The court held that the failure to disclose these credits during the original assessment justified the Income-tax Officer's jurisdiction under section 147. Consequently, the rule challenging the notice under section 148 was discharged, with no order as to costs and the operation of the order stayed for four weeks.
-
1970 (4) TMI 45
Bills sent for excess amounts and entries for such amounts are made in the accounts - amount shown in its balance-sheet as an asset under the head "Sundry creditors considered doubtful" - taxability of such amount when assessee is legally entitled to lesser amount
-
1970 (4) TMI 44
Held that order u/s 23A cannot be rectified u/s 35, because section 35 covers any orders made in the proceedings of the regular assessment and not in proceedings under section 23A - but order u/s 23A can be rectifed by ITO u/s 154 of Income-tax Act, 1961
-
1970 (4) TMI 43
Issues:
1. Claim for deduction of a bad debt under section 10(2)(xi) of the Indian Income-tax Act, 1922.
Detailed Analysis:
The judgment delivered by the Bombay High Court under section 66(2) of the Indian Income-tax Act, 1922, concerned the admissibility of a claim for deduction of a bad debt by a private limited company for the assessment year 1958-59. The company had taken over a business from a partnership firm, including a debt of Rs. 17,617 owed by the firm. The firm's attempt to recover the debt post-partition was unsuccessful, leading the company to claim it as a bad debt written off under section 10(2)(xi) of the Act.
The company also claimed another bad debt of Rs. 2,250, but during the proceedings, it decided to give up this claim. The Tribunal did not uphold the company's claim for the Rs. 17,617 debt, prompting the reference to the High Court. The specific question referred was whether the company's claim for Rs. 19,867 was admissible under section 10(2)(xi) of the Act, with Rs. 19,867 being the aggregate of the two debts.
The High Court analyzed the situation, noting that there was a change of ownership from the partnership firm to the company, but the identity of the business was not broken or interrupted. Citing a previous judgment, the court held that if the business continued without interruption, the successor was entitled to write off trading debts even if they were due from customers prior to the change of ownership. The court rejected the revenue's argument that the debt became a capital asset of the company upon transfer, emphasizing that there was no evidence to suggest the company treated the debt differently from other trading debts taken over.
Ultimately, the High Court applied the precedent and ruled in favor of the company, allowing the deduction of the Rs. 17,617 debt as a bad debt under section 10(2)(xi) of the Act. The court directed the Commissioner to pay the company's costs, concluding the judgment on a favorable note for the assessee.
-
1970 (4) TMI 42
Issues Involved:
1. Bar of Limitation for Proceedings Initiated under Section 34(1)(a) of the Income-tax Act, 1922.
2. Justification of Proceedings under Section 34 for the Assessment Year 1948-49.
3. Impact of the Second Proviso to Section 34(3) on the Assessment.
Issue-wise Detailed Analysis:
1. Bar of Limitation for Proceedings Initiated under Section 34(1)(a) of the Income-tax Act, 1922:
The primary issue was whether the proceedings initiated against the assessee for the assessment year 1948-49 under section 34 of the Income-tax Act, 1922, were barred by limitation. The High Court initially answered this question in favor of the respondent, but the Supreme Court overruled this view. The Supreme Court emphasized that the Amending Act of 1959 (1 of 1959) had a retrospective effect and validated notices issued under section 34(1)(a) even if they were issued beyond the time limit prescribed by the 1948 amendment. The Supreme Court remanded the case to the High Court to reconsider the questions in light of the Amending Act of 1959. The High Court, upon reconsideration, held that the notice issued on November 3, 1958, was valid and saved by section 4 of the Amending Act of 1959.
2. Justification of Proceedings under Section 34 for the Assessment Year 1948-49:
The second issue was whether the proceedings initiated under section 34 for the assessment year 1948-49 were justified in law as for the purpose of giving effect to a finding or direction in the order of the Appellate Assistant Commissioner. The Supreme Court noted that the question of limitation was inherently complex and could involve multiple aspects. The High Court, upon remand, traced the amendments to section 34 and concluded that the Amending Act of 1959 provided a saving clause that validated the notice issued under section 34(1)(a). Thus, the proceedings for the assessment year 1948-49 were justified and lawful.
3. Impact of the Second Proviso to Section 34(3) on the Assessment:
The third issue was whether the assessment made was saved from the bar of limitation under the second proviso to section 34(3). The High Court initially ruled in favor of the respondent, but the Supreme Court directed a reconsideration in light of the Amending Act of 1959. The High Court, upon remand, analyzed the legislative intent and the amendments made to section 34. The court concluded that the Amending Act of 1959 aimed to plug the loopholes that allowed income to escape taxation due to the lapse of time. Therefore, the assessment was saved from the bar of limitation by section 4 of the Amending Act of 1959.
Conclusion:
The High Court, after reconsideration, held that the notice issued on November 3, 1958, under section 34(1)(a) was valid and the proceedings were saved by the Amending Act of 1959. The court answered the surviving questions against the assessee, thereby upholding the validity of the assessment proceedings for the year 1948-49. The judgment emphasized the retrospective effect of the Amending Act of 1959 and its role in validating actions that would otherwise be barred by limitation.
-
1970 (4) TMI 41
Wealth Tax Act, 1957 - held that provisions made for payment of income-tax and super tax which is not an over estimate is allowable as debt owed by the assessee - Whether,the sum being the balance of the demand payable as a result of the findings and orders of the Income-tax Investigation Commission was deductible in determining the net wealth of the company - question is answered in affirmitive in favour of assessee
-
1970 (4) TMI 40
Issues:
Whether the accrued interest of Rs. 1,50,000 due to the assessee as at the valuation date should be included in the net wealth of the assessee.
Analysis:
The case involved a reference made by the Appellate Tribunal under section 27 of the Wealth-tax Act regarding the inclusion of accrued interest in the net wealth of the assessee. The assessee, a Hindu undivided family, maintained accounts on a cash basis and did not include the accrued interest of Rs. 1,50,000 in its wealth-tax return. The Wealth-tax Officer added the amount, but the Tribunal directed its exclusion based on the interpretation of section 7(2)(a) of the Act, which allows adjustments in determining the net value of assets for businesses maintaining regular accounts. The Tribunal held that changing the accounting system from cash to mercantile was not within the officer's power. The Tribunal's decision was based on the principle that accrued income not received should not be considered for an assessee using the cash basis of accounting.
The judgment highlighted the difference between the cash and mercantile systems of accounting, emphasizing that under the cash basis, income is recognized upon receipt, while under the mercantile system, income accrues when the right to receive arises. The court referred to a Supreme Court decision under the Income-tax Act, stating that income under the mercantile system includes accrued income, whereas under the cash system, only actual receipts are considered. The court noted that the Wealth-tax Act does not provide for a different mode of computation, making it inappropriate to include accrued income in the net wealth of an assessee using the cash basis of accounting. The court reasoned that accrued income may not be realized and could potentially become a bad debt, making its inclusion in net wealth unjustified for cash-based accounting.
Ultimately, the High Court agreed with the Tribunal's decision to exclude the accrued interest from the computation of the assessee's net wealth, affirming that under section 7(2)(a) of the Wealth-tax Act, accrued income not received should not be considered for businesses maintaining accounts on a cash basis. The court answered the reference question in the negative, indicating that the sum of Rs. 1,50,000 due as accrued interest was not includible in the net wealth of the assessee. The judgment concluded without any order as to costs, with the Chief Justice concurring with the decision.
This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the court's reasoning behind the decision to exclude the accrued interest from the net wealth calculation of the assessee.
-
1970 (4) TMI 39
Issues Involved:
1. Validity of returns filed beyond the statutory period.
2. Jurisdiction and authority of the Income-tax Officer.
3. Applicability of Section 34(3) of the Indian Income-tax Act, 1922.
4. Authority of the Commissioner under Section 33B.
5. Distinction between chargeability and assessment of tax.
Detailed Analysis:
1. Validity of Returns Filed Beyond the Statutory Period:
The primary issue was whether the returns filed by the assessee for the assessment years 1953-54 to 1956-57 on 9th August 1961 were valid. The Tribunal held that these returns were invalid as they were filed beyond the four-year period specified under Section 34(3) of the Income-tax Act. The Tribunal cited the Supreme Court decision in Commissioner of Income-tax v. Raman Chettiar, which established that a return must be filed within the period mentioned in Section 34(3). Consequently, the Tribunal concluded that the returns filed by the assessee for these years were invalid.
2. Jurisdiction and Authority of the Income-tax Officer:
Mr. Pal, representing the Commissioner, argued that the liability to be assessed arises under Sections 3 and 4, and an assessee can submit to assessment without recourse to the machinery sections. He contended that Section 22 is not the only section under which returns can be made, and an assessee may file returns independently of Section 22. He further argued that the condition attaching to Section 34 does not apply to Section 33B. However, the court rejected this argument, emphasizing that the power to make assessments lapses completely upon the expiry of the periods prescribed in the Income-tax Act.
3. Applicability of Section 34(3) of the Indian Income-tax Act, 1922:
The court reiterated that Section 34(3) imposes a statutory fetter on the income-tax authorities to bring to tax escaped income. This fetter is not for the assessee to relax or waive. The court referred to multiple Supreme Court decisions, including Chatturam v. Commissioner of Income-tax and Commissioner of Income-tax v. Ranchhoddas Karsondas, to emphasize that the period mentioned in Section 34(3) is not merely a period of limitation but a statutory bar to assessment or reassessment beyond the specified period.
4. Authority of the Commissioner under Section 33B:
The Commissioner had issued a combined notice to the assessee proposing to take action under Section 33B and subsequently canceled all the assessments, directing the Income-tax Officer to do fresh assessments according to law. The Tribunal upheld the Commissioner's authority to initiate proceedings under Section 33B but modified the order by canceling the assessments altogether for the years 1953-54 to 1956-57 without giving any direction for making fresh assessments. The court supported the Tribunal's decision, affirming that the returns filed beyond the statutory period were invalid.
5. Distinction between Chargeability and Assessment of Tax:
The court acknowledged the well-recognized distinction between the attribute of taxability and the payability and quantification of tax under the Indian Income-tax Act, 1922. While the liability to pay income-tax is founded on Sections 3 and 4, the actual operation of the charge is dependent upon the machinery sections. The court referred to the Supreme Court decision in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax, which clarified that the tax liability arises on the last day of the accounting year, even though the quantum of tax is determined later. However, this distinction does not warrant ignoring the express bar in Section 34(3).
Conclusion:
The court concluded that the returns filed by the assessee for the assessment years 1953-54 to 1956-57 on 9th August 1961 were invalid. The Tribunal was right in holding that no fresh assessments could be made on the basis of the Commissioner's order under Section 33B. The answer to the question referred to the High Court was in the affirmative, with each party bearing its own costs.
-
1970 (4) TMI 38
Issues Involved:
1. Whether the notice dated March 2, 1960, is time-barred under section 34(1)(a) of the Indian Income-tax Act, 1922.
2. Whether the limitation is saved by sub-section (4) of section 34.
3. Whether the limitation is saved by the second proviso to sub-section (3) of section 34.
4. Constitutionality of the second proviso to sub-section (3) of section 34.
5. Existence of a finding or direction in the earlier Tribunal decision.
Detailed Analysis:
1. Whether the notice dated March 2, 1960, is time-barred under section 34(1)(a) of the Indian Income-tax Act, 1922:
The assessment year in question is 1950-51, with the last date of the assessment year being March 31, 1951. The notice under section 34(1)(a) was issued on March 2, 1960, which is more than eight years after the expiry of the assessment year 1950-51. According to the first proviso to sub-section (1) of section 34, the notice is prima facie barred by time as it was issued beyond the eight-year limitation period.
2. Whether the limitation is saved by sub-section (4) of section 34:
The department argued that sub-section (4) of section 34, inserted by the Income-tax (Amendment) Act, 1959, saves the limitation. The Supreme Court in Prashar v. Vasantsen Dwarkadas clarified that sub-section (4) does not cure the defect of delay in all cases. The amendment did not delete the provision contained in the first proviso to sub-section (1) of section 34. The main effect of the 1956 amendment was to remove the bar of limitation in cases of valuation of one lakh of rupees and upwards. Since the valuation of the case was far below one lakh of rupees, the case is not covered by sub-section (4) of section 34.
3. Whether the limitation is saved by the second proviso to sub-section (3) of section 34:
The department contended that limitation is saved by the second proviso to sub-section (3) of section 34. However, the Supreme Court in Prashar v. Vasantsen Dwarkadas held that the provisions of the second proviso to section 34(3) are unconstitutional to the extent they authorize the assessment or reassessment of any person other than the assessee beyond the period of limitation. Additionally, the Supreme Court in Income-tax Officer, Sitapur v. Murlidhar Bhagwan Das clarified that the expression "any person" must be circumscribed by the scope of the subject-matter of the appeal or revision.
4. Constitutionality of the second proviso to sub-section (3) of section 34:
The Supreme Court in Prashar v. Vasantsen Dwarkadas held that the second proviso to section 34(3) is unconstitutional insofar as it authorizes the assessment or reassessment of any person other than the assessee beyond the period of limitation. This ruling supports the contention that the second proviso cannot be used to save the limitation in the present case.
5. Existence of a finding or direction in the earlier Tribunal decision:
The department argued that the Tribunal's decision on October 7, 1959, contained a finding against Dhiraj Mal. However, upon examining the judgment, it was found that there was no specific finding that the sum of Rs. 21,079 represented Dhiraj Mal's income. The Tribunal's judgment merely stated that the amounts in question could not be treated as the income of the Hindu undivided family and should be deleted. Therefore, there was neither a finding nor direction as contemplated by the second proviso.
Conclusion:
The notice dated March 2, 1960, is not saved from limitation either by sub-section (4) of section 34 or by the second proviso to sub-section (3) of section 34 of the Indian Income-tax Act, 1922. Consequently, the assessment proceeding is barred by time. The court answered the reference by stating that the notice dated March 2, 1960, was barred by time and awarded costs of Rs. 200 to the assessee.
-
1970 (4) TMI 37
Import of plant - adventure in the nature of trade - plant could not be acquired for the purpose of investment, the machinery or plant could not be kept idle indefinitely, it had to be put to use and worked soon after its import - transaction is an adventure in the nature of trade
-
1970 (4) TMI 36
Issues Involved:
1. Validity of the assessment order dated November 25, 1965, under the new Act for the assessment year 1961-62.
2. Validity of the rectification order dated December 26, 1967.
3. Compliance with principles of natural justice in the rectification order.
4. Validity of the notice under section 148 of the new Act.
5. Jurisdiction of the Income-tax Officer to issue the impugned orders.
Detailed Analysis:
1. Validity of the Assessment Order Dated November 25, 1965:
The petitioner challenged the assessment order dated November 25, 1965, arguing that the provisions of the new Act could not be invoked for the assessment year 1961-62. Both parties admitted that the provisions of the old Act were applicable. The court held that the assessment orders could be referred to the jurisdiction under the old Act, despite the wrong sections being initially inserted and later rectified. The Supreme Court's decision in Hazari Mal Kuthiala v. Income-tax Officer was cited, establishing that the exercise of power would be referable to a jurisdiction conferring validity upon it. Therefore, the assessment order was not invalid merely because of the wrong sections cited.
2. Validity of the Rectification Order Dated December 26, 1967:
The petitioner contended that the rectification order was invalid as it attempted to rectify an already invalid order. The court held that even without the rectification, the orders could be treated as those passed under the old Act. The rectification only substituted certain sections without materially affecting the orders. The court concluded that the rectification order was valid.
3. Compliance with Principles of Natural Justice:
The petitioner argued that the rectification order violated the principles of natural justice. The court found that no prejudice was caused to the petitioner by the rectification order, as it did not affect the orders materially. Therefore, there was no violation of natural justice.
4. Validity of the Notice Under Section 148:
The petitioner argued that the conditions precedent for issuing the notice under section 148 were lacking. The court examined the order dated January 17, 1967, which indicated that the Income-tax Officer had received information about the assessee's undisclosed income. The court concluded that the Income-tax Officer had the necessary jurisdiction to issue the notice under section 148, as he had reason to believe that income chargeable to tax had escaped assessment.
5. Jurisdiction of the Income-tax Officer:
The court addressed the preliminary objection raised by the department's counsel, who argued that the application under article 226 was not maintainable due to the alternative remedy of appeal. The court overruled this objection, stating that the petitioner was questioning the jurisdiction of the Income-tax Officer to make the impugned orders. The court found that the Income-tax Officer had the jurisdiction under the old Act, and the assessment orders were valid despite the initial wrong sections cited.
Conclusion:
All the contentions of the petitioner failed. The application was dismissed, and the rule was discharged. The stay order was vacated, with no order as to costs.
-
1970 (4) TMI 35
Issues Involved:
1. Preliminary Objection on Grounds of Delay
2. Validity of Notices under Section 34(1)(a)
3. Reassessment of Income of Hindu Undivided Family vs. Individual
4. Service of Notices and Compliance with Legal Procedures
Detailed Analysis:
1. Preliminary Objection on Grounds of Delay:
The revenue contended that the petition should be dismissed due to a delay of more than three years in filing it after the issuance of the impugned notices. The court acknowledged that delay is a factor in exercising jurisdiction under Article 226 of the Constitution but emphasized that it is not an absolute bar. The court examined the facts and found that the petitioner had promptly responded to the initial notices and had reasonable grounds to assume that the proceedings had been dropped due to the lack of further action by the Income-tax Officer for about two years. Moreover, the court noted that the petitioner had not allowed the reassessment proceedings to progress significantly before filing the petition, thus no prejudice was caused to the revenue. The court also highlighted that the petitioner sought a writ of prohibition, which is not subject to delay considerations when there is a patent lack of jurisdiction.
2. Validity of Notices under Section 34(1)(a):
The petitioner challenged the validity of the notices on the grounds that they were issued for reassessment of the income of the deceased as an individual, whereas the revenue sought to reassess the income of the Hindu undivided family. The court noted that the sanction from the Central Board of Revenue was for the Hindu undivided family, but the notices were directed at the petitioner as the legal representative of the deceased individual. The court emphasized that the notice under Section 34 is foundational for jurisdiction and must correctly identify the assessee. The court concluded that the notices were invalid as they were not issued to the Hindu undivided family but to the petitioner as the legal representative of the deceased individual.
3. Reassessment of Income of Hindu Undivided Family vs. Individual:
The court reiterated that under the Income-tax Act, 'individual' and 'Hindu undivided family' are separate units of assessment. The impugned notices, addressed to the petitioner as the legal representative of the deceased, were intended for reassessment of the deceased's individual income. The court found that the language used in the notices and related communications clearly indicated that the reassessment was targeted at the individual income of the deceased, not the Hindu undivided family. Consequently, the reassessment proceedings against the Hindu undivided family based on these notices were deemed ultra vires and without jurisdiction.
4. Service of Notices and Compliance with Legal Procedures:
The petitioner argued that the notices were not duly served as they were affixed on the outer door of the residence without complying with the conditions set out in Order 5, Rule 17 of the Code of Civil Procedure, applicable by Section 63 of the Indian Income-tax Act, 1922. However, the court found it unnecessary to delve into this issue, given its conclusion on the invalidity of the notices based on the jurisdictional grounds.
Conclusion:
The court allowed the petition, quashing the notices dated 24th March 1962, issued under Section 34(1)(a), and issued a writ of prohibition against further reassessment proceedings based on those notices. The respondents were ordered to pay the costs of the petition to the petitioner.
Petition allowed.
-
1970 (4) TMI 34
Issues Involved:
1. Whether the assessee was non-resident.
2. Whether there was liability to penalty under section 28(1)(a).
Issue-Wise Detailed Analysis:
1. Non-Resident Status of the Assessee:
The Tribunal had to determine whether the assessee was a non-resident based on his movements and the maintenance of a dwelling place in India. The assessee, a natural-born Ceylon citizen, sporadically visited India between 1946 and 1957, primarily to oversee the construction of a theatre. His stays in India during this period were minimal, amounting to 137 days in total.
The Tribunal found that the assessee's visits were more in the nature of a guest's stay rather than that of an inhabitant. The family house in Orathanad, Thanjavur District, was not maintained by him nor maintained for him. The Tribunal concluded that the assessee did not enjoy any family income or have any reserved portion of the family house for his use. Consequently, the Tribunal upheld the Appellate Assistant Commissioner's order that the assessee was a non-resident for the years under consideration.
The court discussed the application of section 4A(a)(ii) of the Income-tax Act, which states that an individual is resident in the taxable territories if he maintains or has maintained for him a dwelling place in the taxable territories for 182 days or more in a year. The court emphasized that mere sporadic visits or temporary stays do not constitute maintaining a dwelling place. The court cited multiple precedents, including Zackariah Sahib v. Commissioner of Income-tax and Commissioner of Income-tax v. Fulabhai Khodabhai Patel, to support its interpretation that the maintenance of a dwelling place requires a sense of continuity, periodicity, or permanence.
The court concluded that the assessee's occasional stays in the family house did not meet the criteria for maintaining a dwelling place under section 4A(a)(ii). Therefore, the assessee was correctly deemed a non-resident.
2. Liability to Penalty under Section 28(1)(a):
The Tribunal also addressed the issue of penalty under section 28(1)(a) of the Income-tax Act, which was imposed by the revenue for the respective assessment years. Given the Tribunal's finding that the assessee was a non-resident, the penalty orders were also canceled.
The court noted that the penalty issue was contingent on the main issue of the assessee's residential status. Since the Tribunal found that the assessee was a non-resident and did not maintain a dwelling place in India, the penalty under section 28(1)(a) could not be sustained. The court upheld the Tribunal's decision to cancel the penalty orders.
Conclusion:
The court answered both questions in favor of the assessee and against the department. The assessee was deemed a non-resident, and there was no liability to penalty under section 28(1)(a). The department was ordered to pay costs, with counsel's fee set at Rs. 250.
-
1970 (4) TMI 33
Issues:
Interpretation of section 22(2A) of the Indian Income-tax Act, 1922 regarding the carry forward of loss for an unregistered firm.
Detailed Analysis:
The judgment involves a reference under section 66 of the Indian Income-tax Act, 1922, concerning the carry forward of loss for an unregistered firm. The assessee, an unregistered firm, filed a voluntary return for the assessment year 1955-56 showing a loss without being noticed under section 22(2) of the Act. The Income-tax Officer issued a notice under section 23(2) and examined the accounts, stating that the loss return was out of time. The Appellate Assistant Commissioner allowed the appeal, directing the Income-tax Officer to proceed on the basis of the return and compute the correct amount of loss. However, the Income-tax Officer later refused to carry forward the loss, leading to further appeals and disputes.
The controversy primarily revolves around the interpretation of section 22(2A) of the Act, which outlines the conditions for carrying forward losses. The section requires the assessee to furnish particulars within the specified time or as allowed by the Income-tax Officer to be entitled to the benefit of carry forward of loss. In this case, the return was filed after the specified time, raising the question of whether further time was allowed by the Income-tax Officer, either expressly or by implication.
The High Court analyzed the actions of the Income-tax Officer and the Appellate Assistant Commissioner to determine if further time was impliedly granted. The Court observed that the Income-tax Officer's actions, such as examining the accounts and not summarily rejecting the return, indicated a willingness to consider the return despite the delay. Additionally, the Appellate Assistant Commissioner's order implied that the delay in filing the return was condoned when the notice under section 23(2) was issued. Therefore, the Court inferred that further time was allowed by implication under section 22(2A) for the filing of the return.
Furthermore, the Court considered the purpose of the Appellate Assistant Commissioner's order, which directed the Income-tax Officer to compute the loss for carrying it forward. The Court emphasized that the order implied the grant of further time and the necessity to complete the assessment for carrying forward the loss. Since the order was not challenged in appeal, its effect mandated the Income-tax Officer to carry forward the loss for set off against subsequent years' income.
In conclusion, the High Court answered the reference in the affirmative, stating that the assessee was entitled to carry forward the loss for the assessment year 1955-56 and set it off against the income for 1959-60. The judgment highlighted the importance of interpreting statutory provisions in line with the actions and orders of tax authorities to uphold the assessee's entitlement to benefits under the Income-tax Act.
|
9911796707
