1979 (6) TMI 31 - HC - Income Tax

Court affirms assessee's right to challenge reassessment under Section 147 of Income Tax Act

Surajmal Ganeshram Versus Commissioner Of Income-Tax, West Bengal

The court concluded in favor of the assessee, affirming their right to appeal against the reassessment under Section 147 of the Income Tax Act, 1961. The ... Best Judgment Assessment, Income Tax Act Issues Involved:1. Legitimacy of the assessment under Section 144 of the Income Tax Act, 1961.2. Applicability of Section 147(a) of the Income Tax Act, 1961.3. Right of appeal under Section 246 of the Income Tax Act, 1961.4. Jurisdictional validity of the proceedings initiated under Section 147(a) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Legitimacy of the Assessment under Section 144 of the Income Tax Act, 1961:The Income Tax Officer (ITO) initiated proceedings under Section 147(a) of the Income Tax Act, 1961, for the assessment year 1947-48, and issued a notice under Section 148. The assessee did not comply with the notices under Section 142(1), leading the ITO to make a best judgment assessment under Section 144. The ITO added Rs. 1,96,000 with interest and Rs. 3,00,000 as capital contribution by the partners to the assessee's total income, deeming them as income from undisclosed sources.2. Applicability of Section 147(a) of the Income Tax Act, 1961:The assessee contended that the initiation of proceedings under Section 147(a) was illegal and void ab initio, as the ITO had no reason to believe that the assessee had not fully and truly disclosed all material facts necessary for its assessment. The Tribunal upheld the revenue's contention, referencing decisions in Naba Kumar Singh Dudhuria v. CIT [1944] 12 ITR 327 and Sundermul & Co. v. CIT [1967] 66 ITR 277, and dismissed the appeal, but allowed deletion of a portion of the interest on the deposits.3. Right of Appeal under Section 246 of the Income Tax Act, 1961:The assessee argued that Section 246 conferred a right of appeal where the assessee denied liability to be assessed. The assessee could appeal against assessments under Sections 143, 144, and 147, without the prerequisite of applying for cancellation under Section 146. The court agreed that Section 246 did not limit the right of appeal against an order under Section 144 and that the decision in Naba Kumar Singh Dudhuria [1944] 12 ITR 327 was contrary to Section 246 of the 1961 Act.4. Jurisdictional Validity of the Proceedings Initiated under Section 147(a) of the Income Tax Act, 1961:The assessee contended that the proceedings under Section 147(a) were without jurisdiction and a nullity, and could be challenged at any stage. The court noted that Section 246 provided for appeals against orders of assessment or reassessment under Section 147, and this right was not limited to objections regarding the amount of income assessed or tax determined. The court held that the assessee had a specific right of appeal against the reassessment made under Section 147 and could agitate all objections to the reassessment, including the objection that it was not liable to be assessed at all.Conclusion:The court concluded that the assessee had a right to appeal against the reassessment made under Section 147 of the Income Tax Act, 1961, and could raise all objections, including the jurisdictional validity of the proceedings. The question referred was answered in the negative and in favor of the assessee, with no order as to costs.