Law:

Section:

Section 147, read with section 154, of the Income-tax Act, 1961 (Corresponding to section 34(1), read with section 35, of the Indian Income-tax Act, 1922) - Income escaping assessment - Information - Position prior to 1-4-1989 - Assessment year 1949-50 - Assessee-company, carried on business in Baroda State - Baroda State merged with Bombay State on 1-8-1949 -Assessee was originally assessed to income -tax at Indian rates but subsequently ITO acting under section 35 of 1922 Act rectified his assessment order charging entire income at concessional rates in terms of Merged States (Taxation Concession) Order, 1949, even though he had definite information that sales of certain value were effected within taxable territories - ITO, thereafter and brought sale proceeds received in taxable territ ories reopened such rectified assessment under section 34(1)(b) of 1922 Act and brought sale proceeds received in takable territories to tax at Indian rates - Whether if rectified order suffered from any of defects set out in section 34(1)(b) of 1922 Act, information which gave ITO reason to so believe, must necessarily be subsequent to rectified order - Held, yes - Whether since information which was relied upon for purpose of taking action under section 34(1)(b) of 1922 Act was available to ITO at time when order of rectification was passed, it could not be said that after assessee was under-assessed ITO obtained any information in consequence of which ITO had reason to believe that such under-assessment had taken place - Held, yes - Whether, therefore, ITO was not justified in making assessment under section 34(1)(b) of 1922 Act - Held, yes FACTS The assessee was a company registered in the former Baroda State having its registered office at Baroda. Prior to the merger of the State of Baroda with the State of Bombay, the assessee was being assessed as a non-resident by the ITO at Bombay. On 22-7-1949, the assessee in the usual course submitted a return of income under section 22(2) of the 1922 Act to the ITO at Bombay for the assessment year 1949-50. on 1-8-1949, the territories of the State of Baroda were merged with the territories of the State of Bombay. On 22-8-1949,…

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