TMI Blog1967 (7) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. A. M. Shah Co. and M/s. R. Ambalal Co., which are owned by the Hindu undivided families, managers of which are the only partners of the assessees. For the assessment years 1959-60, 1960-61 and 1961-62 the assessees were originally assessed by the Income-tax Officer, Circle I, Ward-A, Ahmedabad, while the partners of the assessees and the Hindu undivided families which traded in the names of M/s. A. M. Shah Co. and M/s. R. Ambalal Co. were assessed by Income-tax Officers in other circles. The cases of the assessees, of the partners of the assessees and of the two Hindu undivided families trading in the names of A. M. Shah Co. and R. Ambalal Co. were later transferred to the Income-tax Officer, Group Circle J, Ahmedabad. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. In support of the claim of the Income-tax Officer, to reopen the assessments, reliance was placed in the High Court on clause (b) of section 147 of the Income-tax Act, 1961. The material part of section 147(b) may be read : "If --- . . . (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned. Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill issue appropriate orders or directions to prevent such consequences." The High Court may, therefore, issue a high prerogative writ prohibiting the Income-tax Officer from proceeding with reassessment when it appears that the Income-tax Officer had no jurisdiction to commence the proceeding. The condition which invests the Income-tax Officer with jurisdiction has two branches : (i) that the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment ; and (ii) that it is in consequence of information which he has in his possession that he has reason so to believe. Since the learned judges of the High Court have concentrated their attention upon the second branch of the condition and have reached th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmine whether from that information the Income-tax Officer may have reason to believe that income chargeable to tax had escaped assessment. But the jurisdiction of the court extends no further. Whether on the information in his possession he should commence a proceeding for assessment or reassessment must be decided by the Income-tax Officer and not by the High Court. The Income-tax Officer alone is entrusted with the power to administer the Act : if he has information from which it may be said, prima facie, that he had reason to believe that income chargeable to tax had escaped assessment, it is not open to the High Court, exercising powers under article 226 of the Constitution, to set aside or vacate the notice for reassessment on a reapp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by sale of those goods. But in a petition under article 226 of the Constitution the taxpayer may challenge the validity of a notice under section 147 of the Income-tax Act, 1961, on the ground that either branch of the condition precedent does not exist, but an investigation whether the inferences raised by the Income-tax Officer from the information are correct or proper cannot be made. Counsel for the Commissioner is, therefore, right in contending that the High Court entered upon an investigation of matters which were not within their competence. But the appeal of the Commissioner must still fail. The case of the Commissioner, on the materials placed before the High Court, suffers from a serious infirmity on the first branch of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided between the assessee and another person, the Income-tax Officer would be entitled to bring the entire income to tax as if it had been earned by him. But the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which accrues to a trader is taxable in his hands : income which he could have, but has not earned, is not made taxable as income accrued to him. By adopting a device, if it is made to appear that income which belonged to the assessee had been earned by some other person, that income may be brought to tax in the hands of the assessee, and if the income has escaped tax in a previous assessment a case for commencing a proceeding for reassessment under section 147(b) may be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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