1989 (4) TMI 2 - SC - Income Tax

Reassessment on Non-Resident Upheld: Subsequent-Year Information Valid 'Information' Under Sections 147(b) and 148; Agent Proceedings Irrelevant

SC upheld the validity of reassessment under section 147(b) against a non-resident assessee, holding that information regarding escapement of income, ... Validity of initiation of proceedings under section 148 - non-resident assessee - non- fulfilment of conditions prerequisite for making the reassessments - change of opinion on the part of the Income-tax Officer - Statutory Agent - Whether the Tribunal was right in law in holding that the original assessment for each of the years having been made on the agents, the real assessment proceedings could not be initiated against the assessee direct ? - HELD THAT:- From the material before us it appears that the Income-tax Officer came to realise that income had escaped assessment for the two assessment years when he was in the process of making assessment for a subsequent assessment year. It is true, as the High Court has observed, that this information could have been acquired by the Income-tax Officer if he had exercised due diligence at the time of the original assessment itself. It does not appear, however, that the attention of the Income-tax Officer was directed by anything before him to the fact that the overhead expenses related to the entire business. The information derived by the Income-tax Officer evidently came into his possession when taking assessment proceedings for the subsequent year, In the circumstances, it cannot be doubted that the case falls within the terms of clause (b) of section 147 of the Act, and that, therefore, the High Court is right in holding against the assessee. It is open to an Income-tax Officer to assess either a nonresident assessee or to assess the agent of such non-resident assessee. It cannot be disputed also that if an assessment is made on one, there can be no assessment on the other, and therefore, in this case if the assessment had been made on the Indian agent, the assessment could not have been made on the assessee. However, facts show that the reassessment proceedings commenced against the agent were found to be barred by time by reason of section 149(3) of the Act. The issue of notice under section 148 of the Act to the agent after the expiry of two years from the end of the relevant assessment year is prohibited by the statute., The Income-tax Officer dropped the proceedings when he was made aware of that prohibition. The assessment proceedings taken by him against the agent, have to be ignored and cannot operate as a bar to assessment proceedings directly against the assessee. On this point also, the High Court has taken the correct view when it answered the question in favour of the Revenue. Appeals fail and are dismissed. Issues:1. Jurisdiction of the Income-tax Officer to initiate reassessment proceedings under sections 147 and 148 of the Income-tax Act.2. Whether the Income-tax Officer can proceed directly against the assessee after initiating assessment proceedings against the agent.Analysis:Jurisdiction of the Income-tax Officer for Reassessment:The case involved appeals against the High Court of Andhra Pradesh's judgment answering two questions of law in favor of the Revenue. The first issue was whether the reassessments for the assessment years 1959-60 and 1960-61 were justified under section 148 of the Income-tax Act. The Income-tax Officer initiated reassessment proceedings based on information obtained during the assessment for the subsequent year, revealing that overhead expenses related to the entire business, not just the purchase and sale of tobacco. The High Court held that this was not a mere change of opinion but a valid reason to believe income had escaped assessment, falling within the terms of section 147 of the Act. The court concluded that the reassessments were valid, rejecting the assessee's argument against the jurisdiction of the Income-tax Officer.Proceedings Against Assessee After Agent's Assessment:The second issue addressed whether the Income-tax Officer could proceed directly against the assessee after initiating assessment proceedings against the agent. The Appellate Tribunal initially set aside the reassessments, stating they were without jurisdiction and that assessments had been made on the agents, precluding direct proceedings against the assessee. However, the High Court ruled that once it was determined that reassessment proceedings against the agents were time-barred, the Income-tax Officer could proceed directly against the assessee. The High Court's decision was upheld, emphasizing that the agent's assessment proceedings, which were dropped due to time limitations, could not prevent direct reassessment proceedings against the assessee. Consequently, the appeals were dismissed, affirming the validity of the reassessments and the Income-tax Officer's authority to proceed directly against the assessee.This comprehensive analysis highlights the key legal issues, the court's reasoning, and the final judgment, ensuring a detailed understanding of the legal complexities involved in the case.