Law:

Section:

Section 8 of the Companies (Profits) Surtax Act, 1964 - Profit escaping assessment - Issue of notice for - Assessment years 1971-72 to 1973-74 - Assessing Officer sought to reassess surtax for assessment years in question after audit opined that he had wrongly taken into account specified items for restricting reduction in capital base under rule 2 of Second Schedule - Whether opinion expressed by audit on point already adjudicated upon by ITO while making disputed assessment orders could not be taken as valid information - Held, yes - Whether ITO was not competent to reconsider decision already taken by him and, therefore, notices issued under section 8(b) were without jurisdiction and had to be quashed - Held, yes FACTS The petitioner company, liable to assessment under the Act, filed returns for the relevant assessment years, within the prescribed period. The ITO accordingly passed the orders of assessment. Subsequently, the ITO issued notices under section 8(b), proposing to reassess the profits of the petitioner for relevant assessment years, as he had reason to believe that the petitioner's profit chargeable to tax had escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. On writ petition: HELD The items detailed in the audit report were treated by the ITO as "borrowings" in terms of rule 2 of the Second Schedule while passing the disputed assessment orders. The audit had opined that those items could not be so treated and the ITO erred to that extent. The opinion expressed by the audit on a point already adjudicated upon by the ITO while making the disputed assessment orders could not be taken as a valid "information". It was further obvious that the ITO had issued the impugned notices for a consideration of the decision already taken by him. He was not competent to do so. It view of the above, it was held that in the absence of a valid "information" under section 8(b), the ITO had no jurisdiction to reopen the assessments of the petitioner for the relevant assessment years. The notices issued by the ITO to the petitioner for that purposes were liable to be quashed. Note: The decision was in favour of the assessee. CASES…

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