1975 (2) TMI 18 - HC - Income Tax

High Court rules against reassessment under Income-tax Act, 1961

Jhaverbhai Patel Versus Commissioner Of Income-Tax, Bihar

The High Court ruled in favor of the assessee, holding that reassessment under section 147(b) of the Income-tax Act, 1961 was not justified as no income ... Assessment Proceedings, Assessment Year, Income Tax Act, Income Tax Proceedings, Reassessment Proceedings, Res Judicata Issues Involved:1. Whether the Tribunal was correct in holding that the assessment was to be deemed to be made under section 147(b) of the Income-tax Act, 1961.2. Whether the interest credited to the account of the alleged donees was correctly included in the total income of the assessee on the ground that the alleged gifts made by him on November 1, 1952, were inchoate and incomplete.3. Whether the Tribunal was correct in concluding that the alleged gifts were inchoate and incomplete based on their order dated April 26, 1960, for the assessment year 1954-55.Detailed Analysis:Issue 1: Assessment under Section 147(b)The Tribunal held that the reassessment for the years 1958-59 and 1960-61 should be under section 147(b) of the Income-tax Act, 1961, instead of section 147(a). The Tribunal reasoned that the reassessment was based on new information obtained from the Tribunal's previous order dated April 26, 1960, which concluded that the gifts were inchoate and incomplete. However, the High Court found this conclusion incorrect, stating that the Tribunal was not justified in feeling bound by its earlier decision, as it did not operate as res judicata. The High Court referred to the Supreme Court's decision in Commissioner of Income-tax v. Brij Lal Lohia, emphasizing that earlier Tribunal decisions do not conclusively determine subsequent assessments. Thus, the reassessment under section 147(b) was not justified.Issue 2: Inclusion of Interest in Total IncomeThe Tribunal included the interest credited to the donees' accounts in the assessee's total income, arguing that the gifts were incomplete since no cash had passed to the donees. The High Court disagreed, stating that the gifts were complete when the transfer entries were made in the firm's books, and actual physical delivery of cash was not essential. The Court highlighted that the donees had withdrawn the amounts in previous years, and gift-tax was levied on those amounts. It was well-settled that symbolic delivery through book entries sufficed, provided there were sufficient assets in the firm's account to cover the transactions. The High Court cited the Supreme Court's decisions in Controller of Estate Duty v. C. R. Ramachandra Gounder and Commissioner of Income-tax and Controller of Estate Duty v. N. R. Ramarathnam, which supported the validity of such gifts. Therefore, the interest should not have been included in the assessee's income.Issue 3: Nature of the GiftsThe Tribunal concluded that the gifts were inchoate and incomplete based on its earlier order for the assessment year 1954-55. The High Court found this conclusion incorrect, stating that the Tribunal was not well instructed in law. The Court emphasized that the Tribunal's earlier decision did not conclusively determine the nature of the gifts for subsequent assessments. The High Court reiterated that the gifts were complete when the transfer entries were made, and the donees had withdrawn the amounts. Therefore, the gifts were neither inchoate nor incomplete.Conclusion:The High Court answered all the reframed questions in the negative, in favor of the assessee, and against the department. It held that the assessee was not liable to reassessment under section 147(b) of the Income-tax Act, 1961, as no income had escaped assessment. The Tribunal's reliance on its earlier decision and the inclusion of interest in the assessee's income were both incorrect. The assessee was entitled to the costs of the references, with a consolidated hearing fee of Rs. 150 assessed.