Law: Income Tax Act, 1922

Section: 66(1),10(2)(vii),33B,2(4)

Law: Income Tax Act, 1922

Section: 66(1),10(2)(vii),33B,2(4)

Section 41(2), read with section 256 of the Income-tax Act, 1961 (corresponding to section 10(2)(iii) read with section 66(1) of the Indian Income-tax Act, 1922) - Balancing charge - Assessment year 1957-58 - Whether principle relating to res judicata do not apply to income-tax proceedings - Held, yes - Whether where Tribunal on basis of its earlier order held that transfer of mining rights by assessee was not in course of a venture in nature of trade, Tribunal had not properly applied its mind and had misdirected itself in law on merits of case - Held, yes (matter remanded back) FACTS The assessee-company made a profit transferring certain machinery and plants to five newly floated 100 per cent subsidiary companies of the assessee and also made a profit of another sum by selling certain mining rights, buildings and other plants and machinery to those subsidiaries. The assessee did not disclose transactions in the assessment year and accordingly they were not taken into consideration by the tax officer and from his assessment order the assessee filed an appeal on some other grounds. While that appeal was pending, the Commissioner caused a show-cause notice under section 33B of the 1922 Act to be served on the assessee. Instead of appearing before the Commissioner and without making out any case whatsoever on the merits, the assessee wrote two letters to the Commissioner, who on passed an ex parte order under section 33B of 1922 Act by cancelling the said assessment order and directing the tax officer to make a fresh assessment after serving the statutory notice on the assessee and giving the assessee an opportunity of being heard on those transactions. On appeal, the Tribunal set aside the said order of the Commissioner holding that the transfer of the mining rights was not in the course of a venture in the nature of trade or in the course of trading transaction (having regard to the circumstances under which the formation of the subsidiary companies had to be brought about and that no profit was earned by the assessee as a result of the transfer. On reference: HELD In view of the decision of the Supreme Court in the case of Commissioner of Income-tax v. B.M.…

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