Law:

Section:

Section 147, read with section 155(5), of the Income-tax Act, 1961 - Income escaping assessment - Position prior to 1-4-1989 - Assessment year 1964-65 - Whether sections 147(b) and 155(5) are not mutually exclusive - Held, yes - Whether two sections operate in different spheres and if circumstances of case warrant invocation of wider power conferred by section 147(b), it is open to Income-tax Officer to take recourse to said power even in a case where reassessment is necessitated by reason of its being found that development rebate originally allowed is liable to be withdrawn - Held, yes - Whether in other words, it can be said that Income-tax Officer has jurisdiction to act under section 147(b) also although Act makes a specific provision under section 155(5) for withdrawal of development rebate - Held, yes FACTS For the assessment year 1964-65 the assessee was allowed a deduction of Rs. 2,619 as development rebate on certain machinery which the assessee had installed in his business premises on 30-6-1962. The proprietary business of the assessee was converted into a partnership with effect from 24-8-1962. It was long thereafter that the assessment for the year 1964-65 was completed, on 27-7-1967. But, the legal consequences arising from the transfer of assets which was involved in the transformation of the proprietary business into a partnership escaped the notice of the Income-tax Officer. This mistake was pointed out by the audit party on 19-8-1968. Thereupon, the Income-tax Officer initiated proceedings under section 147 and issued notice under section 148 on 27-1-1969. The ITO withdrew the development rebate on the ground that when the proprietary business was converted into partnership there was a transfer of the machinery and since the said transfer was within the statutory period of 8 years the development rebate was liable to be withdrawn under section 34(3)(b). On appeal, the Appellate Assistant Commissioner held that it was not legally open to the Income-tax Officer to take resort to the general provision for assessment of escaped income in section 147 when the time limit prescribed by section 155(5) had already expired and he, accordingly,…

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