Law: Income Tax Act, 1961

Section: 147,11A(3)

Law: Income Tax Act, 1922

Section: 34(1)

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Information - Position prior to 1-4-1989 - Assessment years 1964-65 and 1965-66 - Whether information which can be basis of initiating action under section 147 may be one which ITO may derive from record itself, and which he might not have observed or to which he might not have applied his mind at time of original assessment and it may also be information which ITO may receive from outside agency - Held, yes - Whether when there was no information whatsoever either on record of file of ITO to which he did not apply his mind earlier or implications of which he did not appreciate, inasmuch as he finalized regular assessment for assessment years under reference after comparing them with assessment of preceding years and nor was there any information from external source which justified him to initiate proceedings under section 147, ITO was not justified in reopening assessment - Held, yes FACTS The original assessment for the assessment year 1964-65 was completed on the total income including dividend income. The ITO found that the interest payment, which was allowed as a deduction in computing the business income, should have, in fact, been allowed as a deduction in computing the income from dividend. He, therefore, reached the conclusion that on account of different rates of taxation for business income and dividend income, the income chargeable to tax had been under-assessed or assessed at a low rate. The ITO also referred to an allowance of entertainment expenses included in general charges where such expenses were allowed; in the view of the ITO, since such expenses were not allowable, the income to that extent had escaped assessment. Therefore, he disallowed certain amount on this count. Similarly, for the assessment year 1965-66, the ITO initiated proceedings under section 147. The AAC held that at the time of regular assessment, the ITO had all the information in his possession on the basis of which he subsequently initiated reassessment proceedings and there was no additional information whatsoever with the ITO so as to make him to take action under section 147. The AAC therefore,…

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