Law: Income Tax Act, 1961

Section: 10,10(28),280,280(ZB)

(a) Income-tax----Reassessment--- Information--- Company--- Surtax--- Computation -of capital---Audit party bringing to notice of Assessing Officer failure to apply R.4---Is not opinion as to law---Reassessment on basis thereof permissible---Indian Companies (Profits) Surtax Act, 1964, S.8, Sched. 11, R.4---Indian Income Tax Act, 1961, Ss. 10(28) & 280ZB. That part alone of the note of an audit party which mentions the law which escaped the notice of the Income-tax Officer constitutes "information" within the meaning of section 8(b) of the Companies (Profits) Surtax Act, 1964; the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the Income-tax Officer. The part of the income, profits and gains of a company not includible in its total income, as computed under Chapter III of the Income-tax Act can be taken into account for the purpose of diminishing the capital base under rule 4 of the. Second Schedule to the Companies (Profits) Surtax Act, 1964. A reassessment was made on the assessee-company for the assessment year 1972-73, under section 8(b) of the Companies (Profits) Surtax Act, 1964, on the basis of information received in the form of a report from the audit party, which felt that the tax credit certificates to the extent of Rs.19,57,996 received by the company under section 280ZB of the Income Tax Act, 1961, should have been deleted from the capital base under .rule 4 of the Second Schedule to the Surtax Act, which authorises exclusion of proportionate capital in respect of exempted income. On appeal, the Commissioner of Income-tax (Appeals), held that the tax credit certificate was not income, and thus, on the ground that there was no escapement, the Commissioner of Income-tax (Appeals) cancelled the' assessment without entering into the question whether the reassessment was otherwise properly initiated. On appeal by the Department, the Tribunal held that, since the question whether the amount of tax credit certificate should be taken into account in computing the chargeable profit under the Companies (Profits) Surtax Act had not been concluded by any decision…

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