1976 (11) TMI 27

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....ly valid ? " The assessee is a private limited company deriving income mainly from (a) business in cigarettes ; and (b) investment in shares of other companies. While making the original assessment, the Income-tax Officer adopted the sum assessable under the head "Dividends" at the gross amount of dividend received by the assessee-company. The audit party which went through the file of the assessee-company noticed that a part of the loans borrowed by the assessee-company went towards investment in shares. The audit party accordingly informed the Income-tax Officer that he should have apportioned the interest payments between the dividend income and business income instead of accepting the assessee's claim for deduction of the entire inte....

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....f it to dividend income, it was obvious that the income had been assessed at a low rate and the case, therefore, fell within the ambit of Explanation 1(b) of section 147. On the second contention it held that the Income-tax Officer had no knowledge of diversion of the borrowed money for the investment in shares nor did he apply his mind regarding apportionment of interest towards dividend income and business income and consequently the plea that the Income-tax Officer merely changed his opinion could not be accepted. It is the correctness of this conclusion of the Tribunal that is challenged in the form of the question extracted already. In the order of the Tribunal, after referring to Explanation 1(b) of section 147, the Tribunal pointe....

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....al income was lower than the actual tax payable because the rate of tax payable on inter-corporate dividend was certainly lower than the rate applicable to the other income. Consequently, it is clear that the requirements of section 147(b) as to the income having escaped assessment is satisfied in the present case. However, Mr. K. Srinivasan, the learned counsel for the assessee, contended that, on the facts, it could not be said that the Income-tax Officer came into possession of any information subsequent to the assessment in consequence of which he formed the opinion that the income had escaped assessment. According to the learned counsel, all the facts were before the Income-tax Officer and if the Income-tax Officer had drawn the nec....