LexCLAGGETT BRACHI CO. LTD., LONDON versus COMMISSIONER OF INCOME-TAX, A.P.
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CLAGGEIT BRACH! CO. ·LTD., LONDON v. COMMISSIONER OF INCOME-TAX, A.P. APRIL 26, 1989 [R.S. PATHAK, CJ, AND RANQANATH MISRA, J.] ) Indian Income Tax Act, 1922/lncome Tax Act 1961: Section 23(3)/Section 147-149-Reassessment consequent on change in m~thod of computation of profits-Whether permissible-Original assessment made on agents-Reassessment-Whether could be initiated .against r,i~sessee . .\ A B c ; - }- The appellant-assessee, a non-resident sterling company, carry· ··~. I ing on business of purchase and sale of tobacco, on its own and for commission, effected purchases through its Indian agents. The agents filed returns of income on behalf of the assessee for the assessment years 1959·60 and 1960-61. The Income-tax Officer completed the assessment D to tax under s. 23(3) of the Indian Income-tax Act, 1922. However, in the course of assessment proceedings for the assess· ment year 1962·63, the.Income-tax Officer noticed that there was a mistake in computing the overhead expenditure. Therefore, in the opinion that income had escaped assessment for the two assessment years he issued notices to the statutory agents, under s. 148 of the E Income-tax Act, 1961, but dropped the proceedings, upon the agents' . objection to the issue of the notice of reassessment on the a~ent of a non-resident assessee after the expiry of two years from the end of the ( relevant assessment year. ~ ~ Thereupon the Income Tax Officer issued notice directly to the F -f assessee. The assessee tiled returns for both the years under protest.· Rejecting the assessee's contention that it could not be served with the notices since its agentS had already been proceeded against, the Income Tax Officer made reassessments on the assessee for the two assessment · years. G The appeals tiled by the assessee were dismissed by the Appellate Assistant Commissioner. In second appeal, the Income-Tax Appellate Tribunal held that the reassessments were without jurisdiction, as they were proceeded on a mere change of opinion of the Income Tax Officer and that the assessee could not be proceeded against ·directly as the 'H 731 A 732 SUPREME COURT REPORTS [1989] 2 S.C.R. assessments were made originally on the agents. On a re~rence made at the instance of the Revenue, the High Court held that reassessments were not made due to a mere change of opinion of the Income Tax Officer, but pursuant to information ~eceived subsequent to the original assessments from the records of the B subsequent assessment year that the overhead expenses related to the \ entire business, including the business as commission agents, and no\ merely to the business of purchase and sale of tobacco, and that then: . was nothing to prevent the Income Tax Officer from proceeding directly against the assessee and re-assessing it for the two assessment years, when he found that reassessment proceedings could not be taken C against the agentS. In the appeal before this Court, on behalf of the assessee, it was -\ - contended that the Income Tax Officer had no jurisdiction to take proceedings under ss. 147 and 148 of the Income-tax Act because the ~ conditions pre-requisite for making the reassessments were not satis- D fied, and it was not open to the Income Tax Officer to take assessment proceedings against the assessee when he had taken assessment pro- ceedings against the Indian agent. Dismissing the, appeals, E HELD: 1. The Income Tax Officer came to realise that income had escaped assessment for the two assessment years when he was in the process of making assessment for a subsequent assessment year. While making that assessment, he came to know from the documents per- taining to that assessment that the overhead expenses related to the entire business, including as commission agents, and not confined to the y F business of purchase and sale. The attention of the Income Tax Officer ). was not directed by anything before him at the time of original assess-,,..,... ment to the fact that the overhead expenses related to the entire business. In the circumstances, there is no doubt that the case falls within the terms of cl. (b) of s. 147 of that Act and there was justifica- tion for initiating the proceedings for reassessment for the two assess- G ment years in question. [736A-D] H 2. It is open to an Income Tax Officer to assess either a non-resident assessee or the agent of such non-resident assessee. But i
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