Excess tax credit alone cannot justify reassessment where assessed income and tax rate remain unchanged.

Reassessment under section 147(b) was invalid where the only change was withdrawal of tax credit earlier allowed for tax deducted at source. The Court held that section 147(b) read with Explanation 1 applies only when income chargeable to tax has escaped assessment, including under-assessment, assessment at too low a rate, excessive relief, or excessive loss/depreciation. Here, the assessed income and tax rate remained unchanged, and excess tax credit did not amount to excessive relief in computing taxable income. As no case fell within Explanation 1(c), reopening was not attracted and the original assessment stood.

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Issues: Whether reassessment under section 147(b) of the Income-tax Act, 1961 was valid on the ground that tax credit earlier allowed for tax deducted at source should not have been granted.

Analysis: The reopening rested on information that the deductor had not remitted the tax deducted from dividends to the Central Government. The Court held that section 147(b) read with Explanation 1 applies only where income chargeable to tax has escaped assessment, including cases of under-assessment, assessment at too low a rate, excessive relief, or excessive loss/depreciation. On the facts, the assessed income and rate of tax remained unchanged; only the credit for tax deducted at source was withdrawn. Following the principle that excess credit is not the same as excessive relief in computing taxable income, the Court held that the case did not fall within Explanation 1(c).

Conclusion: Reassessment under section 147(b) was not attracted and was invalid.

Final Conclusion: The reference was answered against the Revenue and the assessee retained the benefit of the original assessment insofar as the reopening was concerned.

Ratio Decidendi: Excess tax credit allowed at the stage of assessment does not, by itself, amount to income being made the subject of excessive relief so as to justify reassessment under section 147(b).

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