1986 (3) TMI 5 - SC - Income Tax

Court affirms jurisdiction for reassessment based on new income info

Niranjan And Co. Pvt. Limited Versus Commissioner of Income-Tax, West Bengal, And Others

The court upheld the notice issued under Section 147 of the Income-tax Act, 1961, for the reopening of a completed assessment. The revised return ... Whether, in fact, the reassessment to be made pursuant to the notice issued, the income assessed would be more by Re. 1 or less than the income already assessed is not material or relevant for the question of jurisdiction to issue the notice under section 147 - In our opinion, on the materials on record, the Division Bench was, right in dismissing the appeal of the assessee/appellant Issues Involved:1. Grounds for reopening a completed assessment under peculiar circumstances.2. Jurisdiction of the Income-tax Officer to issue notice under Section 147 of the Income-tax Act, 1961.3. Whether there was escapement of income or underassessment of income.4. Applicability of legal precedents and principles regarding reopening of assessments.Issue-wise Detailed Analysis:1. Grounds for Reopening a Completed Assessment:The primary issue in this case was whether there were valid grounds for reopening a completed assessment for the assessment year 1962-63. The assessee had initially filed a return showing an income of Rs. 2,092, but later filed a revised return indicating a total profit of Rs. 12,797.65, including profit from construction work. The Income-tax Officer had completed the assessment based on the original return before receiving the revised return. The revised return was received after the completion of the assessment, prompting the issuance of a notice under Section 147 of the Income-tax Act, 1961.2. Jurisdiction of the Income-tax Officer to Issue Notice under Section 147:The jurisdiction to issue a notice under Section 147 hinges on the belief that income chargeable to tax has escaped assessment. The court reiterated that reopening under Section 147 can only occur if there was an omission or failure on the part of the assessee to disclose fully and truly all material facts, or if the Income-tax Officer, based on information in his possession, has reason to believe that income chargeable to tax has escaped assessment. In this case, the revised return, which disclosed a higher income, constituted new information that came to the Income-tax Officer's possession after the original assessment, justifying the issuance of the notice.3. Escapement of Income or Underassessment of Income:The court examined whether the profit from the construction work, which was included in the revised return, had been considered in the original assessment. It was found that the original return and the balance-sheet did not readily reconcile with the figures in the revised return. The Division Bench concluded that the figures in the revised return provided grounds for the belief that income chargeable to tax had escaped assessment, thus validating the reopening of the assessment under Section 147.4. Applicability of Legal Precedents and Principles:The court referred to several legal precedents to elucidate the principles governing the reopening of assessments. It cited cases like CIT v. Ranchhoddas Karsondas, CIT v. S. Raman Chettiar, and Balchand v. ITO to highlight that a voluntary return filed before the completion of an assessment must be considered by the Income-tax Officer. However, once an assessment is completed, a subsequent return can only be considered through the process of reopening the assessment. The court also referred to CIT v. A. Raman & Co. and CIT v. Mahaliram Ramjidas to emphasize that the Income-tax Officer can reopen an assessment if new information comes to his possession post-assessment, leading to a reasonable belief of income escapement.Conclusion:The court concluded that the Division Bench of the Calcutta High Court was correct in upholding the notice issued under Section 147. The revised return, received after the original assessment, constituted new information that justified the reopening of the assessment. The appeal by the assessee was dismissed, affirming the jurisdiction of the Income-tax Officer to issue the notice based on the revised return. The court emphasized that the sufficiency of the reasons for reopening is not open to scrutiny, provided the reasons have a rational connection to the belief of income escapement.Final Judgment:The appeal was dismissed with costs, and the reopening of the assessment under Section 147 was upheld.