Commissioner of Income Tax vs V.R. Durgamba

K.A. Thanikkachalam, J.—At the instance of the Department, the Tribunal referred the following question for the opinion of this court u/s 256(2) of the Income Tax Act, 1961 :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income Tax Officer had not validly assumed jurisdiction u/s 147(a) of the Act ?"

The Income Tax Officer had taken action u/s 147(a) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), in order to bring to assessment a sum of Rs. 3,423 granted to the assessee as interest u/s 214 of the Act. The assessee has been granted this interest. For the assessment year 1973-74, the interest was allowed on November 21, 1974. This interest of Rs. 3,423 was not returned by the assessee for the assessment year in question in the original assessment proceedings. After the original assessment proceedings were completed, but before action was initiated u/s 147(a) giving rise to the appeal, the Income Tax Officer had taken action u/s 147(b) and made an assessment on October 7, 1977. That assessment u/s 147(b) was the subject-matter of appeal and, ultimately the Tribunal held that the reassessment was not made by the Income Tax Officer on a valid assumption of jurisdiction. The Tribunal found that the Income Tax Officer''s action in reopening the assessment u/s 147(b) of the Act earlier was to withdraw the standard deduction of Rs. 3,400 allowed by the Income Tax Officer in the original assessment on the basis that the remuneration received by the assessee from V. Ramakrishnan Sons Pvt. Ltd. was income under the head "Salary" and the Income Tax Officer took action u/s 147(b) for the purpose of modifying the earlier order of the Income Tax Officer but while completing the reassessment on the basis of section 147(b) of the Act, the Income Tax Officer also included interest income of Rs. 3,423 u/s 214 and that, in the reassessment u/s 147(b) made by the Income Tax Officer, the said income formed the subject-matter of assessment. The reassessment, however, was cancelled as without jurisdiction. Subsequent to this cancellation, the Income Tax Officer has issued notice u/s 147(a) for the purpose of including in the assessment the sum of Rs. 3,423 and it is this assessment u/s 147(a) that was the subject-matter of appeal before the Tribunal. It was also found that the Income Tax Officer in the reassessment u/s 147(a) carried out another modification by treating the remuneration received by the assessee from V. Ramakrishnan Sons Pvt. Ltd., and R.S. Industrial Corporation Pvt. Ltd., totalling Rs. 24,000 as the income of the assessee under the head "Other sources", instead of under the head "Salary" as originally treated. By following the decision of the Allahabad High Court in the case of Manoo Lal Kedarnath Vs. Union of India (UOI) and Others, , the Tribunal held that the order of the Appellate Assistant Commissioner cancelling the reassessment u/s 147(a) as without valid jurisdiction was justified.

In the abovesaid decision, the Allahabad High Court held that once a proceeding in respect of an item other than the one mentioned in the notice under 148 has been taken into consideration and the same is subsequently not upheld in appeal, it is not possible to resort to the proceeding in respect of the same item afresh u/s 147(b). Inasmuch as the order passed by the Tribunal is in accordance with the decision cited supra, we answer the question referred to us in the affirmative and against the Department. There will be no order as to costs.