Summary
The appellant-assessee, a non-resident sterling company, carrying on business of purchase and sale of tobacco, on its own and for commission, effected purchases through its Indian agents. The agents filed returns of income on behalf of the assessee for the assessment years 1959-60 and 1960- 61. The Income-tax Officer completed the assessment to tax under s. 23(3) of the Indian Income-tax Act, 1922.
However, in the course of assessment proceedings for the assessment year 1962-63, the Income-tax Officer noticed that there was a mistake in computing the overhead expenditure.Therefore, in the opinion that income had escaped assessment for the two assessment years he issued notices to the statu- tory agents, under s. 148 of the Income-tax Act, 1961, but dropped the proceedings, upon the agents' objection to the issue of the notice of reassessment on the agent of a non- resident assessee after the expiry of two years from the end of the relevant assessment year.Thereupon the Income Tax Officer issued notice directly to the assessee. The assessee filed returns for both the years under protest. Rejecting the assessee's contention that it could not he served with the notices since its agents had already been proceeded against, the Income Tax Officer made reassessments on the assessee for the two assessment years.The appeals filed by the assessee were dismissed by the Appellate Assistant Commissioner. In second appeal, the Income-Tax Appellate Tribunal held that the reassessments were without jurisdiction, as they were proceeded on a mere change of opinion of the Income Tax Officer and that the assessee could not he proceeded against directly as the 732assessments were made originally on the agents.On a reference made at the instance of the Revenue, the High Court held that reassessments were not made due to a mere change of opinion of the Income Tax Officer, but pursu- ant to information received subsequent to the original assessments from the records of the . subsequent assessment year that the overhead expenses related to the entire busi- ness, including the business as commission agents, and not merely to the business of purchase and sale of tobacco, and that there was nothing to prevent the Income Tax Officer from proceeding directly against the assessee and re-assess- ing it for the two assessment years, when he found that reassessment proceedings could not be taken against the agents.In the appeal before this Court, on behalf of the asses- see, it was contended that the Income Tax Officer had no jurisdiction to take proceedings under ss. 147 and 148 of the income-tax Act because the conditions pre-requisite for making the reassessments were not satisfied, and it was not open to the Income Tax Officer to take assessment proceed- ings against the assessee when he had taken assessment proceedings against the Indian agent.Dismissing the. appeals,HELD: 1. 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 subse- quent assessment year. While making that assessment, he came to know from the documents pertaining to that assessment that the overhead expenses related to the entire business, including as commission agents, and not confined to the business of purchase and sale. The attention of the Income Tax Officer was not directed by anything before him at the time of original assessment to the fact that the overhead expenses related to the entire business. In the circum- stances, there is no doubt that the case fails within the terms of cl. (b) of s. 147 of that Act and there was justi- fication for initiating the proceedings for reassessment for the two assessment years in question. [736A-D]2. It is open to an Income Tax Officer to assess either a non-resident assessee or the agent of such non-resident assessee. But if an assessment is made on one there can be no assessment on the other. [736E]733 Therefore, in the instant case, if the assessment had been made on the Indian agent, the assessment could not have been made on the assessee. However, the reassessment pro- ceedings commenced on the agent were barred by time by reason of s. 149(3) of the Act. The issue of notice under s.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. Hence, the assessment proceedings against the agent have to be ignored, and cannot operate as a bar to assessment proceeding directly against the assessee. [736F-G]See the full content of this document
Extract
Claggett Brachi Co.Ltd., London VS. Commissioner Of Income-tax, A.P.
PETITIONER: CLAGGETT BRACHI CO.LTD., LONDON Vs.RESPONDENT: COMMISSIONER OF INCOME-TAX, A.P.DATE OF JUDGMENT26/04/1989BENCH: PATHAK, R.S. (CJ)BENCH: PATHAK, R.S. (CJ)MISRA RANGNATHCITATION: 1989 AIR 1472 1989 SCR (2) 731 1989 SCC Supl. (2) 182 JT 1989 (2) 273 1989 SCALE (1)1133ACT: Indian Income Tax Act, 1922/Income Tax Act 1961: Section 23(3)/Section 147-149--Reassessment consequent on change in method of computation of profits--Whether permissible--Original assessment made on agents...
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