1971 (8) TMI 30 - SC - Income Tax

Supreme Court clarifies tribunal's authority on Excess Profits Tax Act proceedings

The Supreme Court directed the Income-tax Appellate Tribunal to determine that the proceedings under section 10A were initiated during assessment or ... Held that the Income-tax Officer would have jurisdiction to initiate proceedings under section 34(1)(b) of the Income-tax Act, 1922, which is in pari materia with section 15 of the Act if he acted on information received from the decision of the superior authorities or the court even in the assessment proceedings Issues:1. Whether the proceedings under section 10A were started in the course of assessment or reassessment proceedings commenced under section 15 of the Excess Profits Tax Act, 1940Rs.2. Whether there was any definite information within the meaning of section 15 for the Excess Profits Tax Officer to reopen the excess profits tax assessmentsRs.3. Whether the Excess Profits Tax Officer was competent to apply the provisions of section 10A and make necessary adjustments in the revised assessment under section 15Rs.Analysis:Issue 1:The Supreme Court directed the Income-tax Appellate Tribunal to submit a supplementary statement of the case to determine if the proceedings under section 10A were initiated during assessment or reassessment under section 15 of the Excess Profits Tax Act, 1940. The Tribunal confirmed that the proceedings under section 15 were pending when the proceedings under section 10A were initiated. The court emphasized that before applying section 10A, proceedings under section 15 must be initiated, and in this case, the tax officer had indeed commenced proceedings under section 15 before issuing the notice under section 10A. The court held that the law's requirements were satisfied, and the second question was answered in favor of the revenue.Issue 2:The court addressed whether there was definite information for the Excess Profits Tax Officer to reopen the excess profits tax assessments. The Appellate Assistant Commissioner's order in the income-tax proceedings provided information that there was only a partial partition in the movable property of one of the partners. This information was considered sufficient for the Excess Profits Tax Officer to act under section 15. The court cited precedents to support that information from superior authorities or court decisions could trigger proceedings under section 15. It was argued that the alleged purpose of the partial partition to reduce excess profits tax liability was not examined by the Appellate Assistant Commissioner in the income-tax proceedings. However, the court ruled that the information of partial partition was relevant for section 15 and justified the Excess Profits Tax Officer's actions under section 10A.Issue 3:Regarding the competence of the Excess Profits Tax Officer to apply section 10A and make necessary adjustments in the revised assessment under section 15, the court found in favor of the revenue. The court concluded that the Excess Profits Tax Officer had jurisdiction to examine whether the partial partition was done to avoid or reduce excess profits tax liability under section 10A, based on the information available from the Appellate Assistant Commissioner's order in the income-tax proceedings.In conclusion, the appeals were allowed, and the court ruled in favor of the revenue on all issues, directing the answers to both questions in favor of the revenue with costs awarded.