1985 (10) TMI 54 - HC - Income Tax

Tribunal decision finalizes settlement, bars reassessment post-settlement. Officer's order post-settlement invalid.

The court upheld the Tribunal's decision that reassessment proceedings concluded upon finalization of the settlement petition, barring reassessment of new ... Income Escaped Assessment, Reassessment Issues: Reassessment proceedings conclusion upon finalization of settlement petition - Validity of reassessment post settlement petition finalization.Analysis:The judgment delivered by BHARUCHA J. and KANIA J. addressed the common issue raised by the Revenue regarding the justification of the Tribunal's finding on the conclusion of reassessment proceedings upon the finalization of a settlement petition on June 5, 1968. The case involved assessment years 1957-58 and 1958-59, with the Income-tax Officer initiating reassessment proceedings under section 147(a) read with section 148 of the Income-tax Act, 1961, based on the belief that hundi borrowings of the assessee represented concealed income chargeable to tax.The assessee, in response, submitted a settlement petition to the Commissioner of Income-tax, Bombay, addressing the hundi borrowings issue and proposing a settlement for the assessment years 1957-58 to 1964-65. This settlement petition was finalized on June 5, 1968, with the determination of escaped income and the agreed tax payment schedule. Subsequently, a statement was made to the Income-tax Officer on August 19, 1969, regarding incorrect depreciation claimed on the cinema building during the original assessment.The Tribunal ruled that the reassessment proceedings had concluded upon the finalization of the settlement petition on June 5, 1968. As the issue of excessive depreciation arose post-settlement finalization, the Income-tax Officer could not reassess the item without issuing a fresh notice under section 147(a) read with section 148 of the Income-tax Act, 1961. The court agreed with the Tribunal's decision, emphasizing that the reassessment proceedings, primarily concerning the hundi borrowings, were deemed concluded upon settlement finalization, barring the reassessment of new issues post-settlement.In conclusion, the court upheld the Tribunal's decision, affirming that the reassessment proceedings were concluded with the finalization of the settlement petition. Therefore, the Income-tax Officer's reassessment order post-settlement finalization was deemed invalid. The judgment favored the assessee, answering the raised question in the affirmative and in favor of the assessee, with no specific order regarding costs.