Reassessment based on later-year information and direct action against a non-resident assessee were both upheld.

Reassessment under section 147(b) was valid where information from a later assessment year showed that the original overhead expense computation was erroneous; the material was newly obtained and the reopening was not a mere change of opinion. Direct reassessment against the non-resident assessee was also permissible because the statutory bar on proceeding against the agent after the prescribed time meant those agent proceedings could not preclude action against the assessee itself. Both reassessments were upheld and the challenge failed.

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Issues: (i) Whether reassessment under section 147(b) of the Income-tax Act, 1961 was valid when the Income-tax Officer derived information from records of a subsequent assessment year showing that the original computation of overhead expenses was erroneous; (ii) Whether reassessment proceedings could be initiated directly against the non-resident assessee after proceedings against its agent had been dropped as time-barred under section 149(3) of the Income-tax Act, 1961.

Issue (i): Whether reassessment under section 147(b) of the Income-tax Act, 1961 was valid when the Income-tax Officer derived information from records of a subsequent assessment year showing that the original computation of overhead expenses was erroneous.

Analysis: The material obtained during the assessment for a later year revealed that the overhead expenses related to the assessee's entire business, including commission agency activity, and not merely to the purchase and sale of tobacco. That information came to the Income-tax Officer from subsequent assessment proceedings and was not shown to have been before him when the original assessments were made. The case therefore fell within the statutory condition of escaped assessment based on information in possession of the Income-tax Officer.

Conclusion: The reassessment proceedings were valid and were not vitiated by mere change of opinion.

Issue (ii): Whether reassessment proceedings could be initiated directly against the non-resident assessee after proceedings against its agent had been dropped as time-barred under section 149(3) of the Income-tax Act, 1961.

Analysis: Although assessment may be made either on a non-resident assessee or on its agent, the bar against issuing notice to the agent after the prescribed period meant that the proceedings against the agent could not be sustained. Once those proceedings were found to be prohibited by statute and were dropped, they could not operate as a bar to proceedings directly against the assessee.

Conclusion: Direct reassessment against the assessee was permissible.

Final Conclusion: The reassessments were upheld on both grounds and the assessee's challenge failed.

Ratio Decidendi: Information obtained from subsequent assessment proceedings can justify reassessment for escaped income, and time-barred proceedings against an agent do not preclude lawful reassessment directly against a non-resident assessee.

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