TMI Blog1973 (12) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation the said sum of Rs. 62 lakhs for the said assessment year and was accordingly taxed under section 10(2)(vii) of the Indian Income-tax Act, 1922, for a sum of Rs. 2,21,057. The difference between the written down value and the actual sale consideration was the figure which was subjected to tax on this account. It is stated that the assessment was made on the basis of the documents and evidence furnished by the assessee. Thereafter, on the 28th of February, 1961, the assessment for the assessment year 1958-59 was completed on the basis of the return filed by the assessee. The asseesee claimed that its business and its collieries had been sold with effect from the 1st January, 1955. The assessee also produced certain evidence in support of the said claim and was taxed only on interest on security and dividend income. The assessee's claim for expenses under the head " Loss on working " was disallowed on the ground that in the relevant year the assessee was not carrying on any business. On the 21st of July, 1965, the assessee was allowed to take a supplementary ground before the Income-tax Appellate Tribunal in its appeal for the assessment year 1956-57, contending that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the profits u/s 10(2)(vii) in respect of the immovable properties are liable to be included in the total income of the assessee in the assessment year 1958-59 and not in the assessment year 1956-57. At the time of the assessment year 1958-59, the assessee had failed to disclose fully and truly all material facts necessary for his assessment for that year. As each assessment is a separate and distinct entity, disclosure of the fact of sale in connection with the assessment year 1956-57 is not disclosure for the assessment year 1958-59. The assessee did not, in fact, offer the income arising from sale of property in respect of the assessment year 1958-59 nor did he even specifically disclose the fact of sale. In such circumstances, therefore, this income of Rs. 2,21,057 which has escaped assessment requires to be assessed. Hence, the action u/s 148(a) is proposed." As a matter of fact the substance of these reasons has been stated in the affidavit-in-opposition filed in answer to the rule nisi. It appears that the Income-tax Officer has proceeded on the basis of failure and omission on the part of the assessee to disclose fully and truly all primary facts and as a resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer and Kantamani Venkata Narayana Sons v. First Additional Income-tax Officer and the decision of this court in the case of Commissioner of Income-tax v. Kallu Babu Lalchand . Counsel for the revenue, then, contended that in view of the provisions of section 279(2)(d)(ii) read with section 150(2) and section 153, Explanation 2 of the Income-tax Act, 1961, the action taken in this case could be justified on the ground of clause (b) of section 147 of the Income-tax Act, 1961. To this the first submission of the assessee is that clause (b) of section 147 cannot be invoked in this case because the Income-tax Officer had purported to take action under clause (a) of section 147 of the Income-tax Act, 1961. As it is not necessary, the notice does not mention under which clause the action was taken but counsel for the assessee can justifiably claim that the grounds indicated in the reasons recorded as well as in the affidavit-in-opposition establish that the Income-tax Officer was proceeding on the basis of clause (a) of section 147 of the Income-tax Act, 1961. The first question in this case is whether where the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice issued under clause (a) of section 147 of the Income-tax Act, 1961, as one under clause (b) of the Income-tax Act, 1961. The next question is whether this action can be held to be valid in view of the provisions of section 297(2)(d)(ii) of the Income-tax Act, 1961, read with section 150(2) and section 153, Explatiation 2, of the said Act. Counsel for the assessee contended that section 297(2)(d)(ii) of the Income-tax Act, 1961, did not apply because, firstly, it was submitted that it was in conflict with the provisions of section 297(2)(a) of the Income-tax Act, 1961, and it was submitted that assessment under that Act included reassessment. Therefore, it was urged that inasmuch as a return for the original assessment had been filed before the coming into operation of the Income-tax Act, 1961, clause (a) of sub-section (2) of section 297 applied to this case because reassessment was a part and continuation of the process of assessment and not clause (d), sub-clause (ii) of section 297(2) of the Act. It is true that by definition " assessment " could include reassessment, but clause (a) of sub-section (2) of section 297 deals with the general situation, namely, where a retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises, this contention of the assessee cannot be accepted. The next question that requires consideration is whether under section 150 of the Income-tax Act, 1961, this notice can be treated as valid. Counsel for the revenue contended that in view of sub-section (1) of section 150 the period of limitation prescribed under section 149 would not be a bar for taking action in this case. It was submitted that it was to give effect to the finding or direction contained in the order of the Appellate Tribunal that the present action was taken, the first question that requires consideration is whether it was to give effect to any finding or direction. As mentioned hereinbefore the Tribunal following the decision of the Supreme Court given under the provisions of the 1922 Act in the case of Income-tax Officer, " A " Ward, Sitapur v. Murlidhar Bhagwan Das subsequently deleted the direction contained in the appellate order as indeed specific direction could not be given by the Tribunal in respect of another year when hearing an appeal in respect of one year, but there was a finding in the year 1956-57 that the income in question though liable to be taxable was not taxable in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commissioner of Income-tax. There a notice under section 34(1)(b) of the Indian Income-tax Act, 1922, was issued on November 7, 1958, to reopen the assessment of the deceased assessee for assessment year 1957-58. It was served only on the appellant No. 2. On June 15, 1963, the Appellate Assistant Commissioner set, aside the assessment made pursuant to that notice on the ground that it was necessary to issue notice to all the legal representatives of the deceased assessee. In the meantime, the Income-tax Act, 196 1, came into force on April 1, 1962. Thereafter, on January 7, 1964, the Income-tax Officer issued a notice under section 148 of the Act of 1961 to the appellants. It was held by the Supreme Court that since the proceedings under section 34(1)(b) of the 1922 Act were pending since April 1, 1962, it was not open to the Income-tax Officer to issue notice under section 148 of the Income-tax Act, 1961, and since the Appellate Assistant Commissioner's order was not passed under the 1961 Act, the department could not take the support from section 150(1) of the 1961 Act. It appears as is evident from the facts stated before that notice was issued under section 148 of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2 of that section did not come into play. Explanation 2 created a fiction by deeming an assessment to be made in consequence of an order or to give effect to a finding or direction which was not there. But there was no provision that the proceedings under the 1922 Act should be deemed to be proceedings under the new Act. But for this no fiction or deeming provision, in our opinion, is necessary because section 297(2)(d)(ii) read properly with the provisions of the new Act would apply mutatis mutandis to the present case. Therefore, even though in respect of an order passed under the 1922 Act, action could be taken under the 1961 Act, the said provision would be applicable. Counsel for the assessee contended that this would result in double deeming which was not permitted. Reliance was placed on a decision of the Supreme Court in the case of Commissioner of Income-tax v. Elphinstone Spinning and Weaving Mills Co. Ltd. and Amarchand N. Shroff's case 2. On the other hand it has been clearly laid down by the Supreme Court that when a statute creates a fiction the situation in which the fiction can work should be postulated. Reliance may be placed on the decisions of the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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