ICE & GENERAL MILLS vs. INCOME TAX OFFICER, CENTRAL CIRCLE II, MEERUT

CIVIL APPEAL No. 2015/1972Supreme Court[1980] 2 S.C.R. 23620 November 1979Bench: 2 JudgesAuthor: V.D. TULZAPURKAR, E.S. VENKATARAMIAH5 pages
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What were the facts?

The assessee, a firm engaged in ice manufacturing and potato preservation, was assessed for AY 1961-62. The Income Tax Officer initiated proceedings under Section 34(1) of the 1922 Act on December 21, 1961, alleging escaped income of Rs. 1 lakh from potato transactions and certain property income. An order dated December 22, 1965, brought this income to tax. This order was annulled on appeal on May 10, 1967, as the initiation of reassessment was deemed unjustified. The department did not pursue further. Subsequently, on July 14, 1967, the Income Tax Officer issued a notice under Section 148 of the 1961 Act for the same assessment year, after obtaining Commissioner's sanction. The assessee filed a return under protest and challenged the notice via a writ petition, arguing that Section 297(2)(d)(ii) of the 1961 Act barred reassessment as proceedings under Section 34(1) of the 1922 Act were pending on April 1, 1962. The High Court rejected this, stating Section 297(2)(d)(ii) required legal proceedings with jurisdiction.

What did the Supreme Court hold?

The Supreme Court held that the factual pendency of proceedings under Section 34 of the 1922 Act on April 1, 1962, is the material consideration for the application of Section 297(2)(d)(ii) of the 1961 Act, and not the legality or jurisdiction of those proceedings. The Court cited its decisions in S. B. Jain v. Mahendra and Gujar Mal Modi v. Commissioner of Income Tax, which emphasized the factual pendency. In this case, it was admitted that proceedings under Section 34(1) of the 1922 Act concerning the Rs. 1 lakh escaped income were factually pending on April 1, 1962. Therefore, the notice issued under Section 148 of the 1961 Act was incompetent. The Court also found the revenue's attempt to distinguish the case based on the earlier proceedings being without jurisdiction to be factually incorrect, as the reassessment order indicated initiation under Section 34(1)(b) due to information gathered, not solely on omission by the assessee. The High Court's decision was set aside, and the notice under Section 148 was quashed. No issue was expressly left undecided.

What were the issues?

1. Whether the factual pendency of proceedings under Section 34(1) of the Indian Income Tax Act, 1922, on April 1, 1962, is sufficient for the application of Section 297(2)(d)(ii) of the Income Tax Act, 1961, thereby barring reassessment proceedings under Section 147 of the 1961 Act, OR is legality and jurisdiction of the earlier proceedings also a prerequisite? (Mixed question of law and fact, turning on Section 297(2)(d)(ii)). Assessee's contention: Section 297(2)(d)(ii) of the 1961 Act prohibits reassessment under Section 147 of the 1961 Act if proceedings under Section 34(1) of the 1922 Act were factually pending on April 1, 1962, irrespective of their legality or jurisdiction. They relied on S. B. Jain v. Mahendra and Gujar Mal Modi v. Commissioner of Income Tax. Revenue's contention: The earlier proceedings under Section 34 of the 1922 Act were without jurisdiction and therefore non est, as the Assistant Appellate Commissioner had annulled the reassessment order on the ground that the initiation was not justified. Therefore, Section 297(2)(d)(ii) would not apply.

Which sections of the Income-tax Act were involved?

Section 297(2)(d)(ii),Section 147,Section 148,Section 34(1),Section 34(1)(a),Section 34(1)(b)

AI-generated summary — verify with the full judgment below

A 236 ICE & GENERAL MI.LLs v. !"<COME TAX OFFICER, CENTRAL CIRCLE II, MEERUT ·November 20, 1979 B D E F G II [V. D. '{'uLZAPURKAR AND E. S. VENKATARAMIAII, JJ.] Escaped income-Reopening of Gssessment under section 147 of lite 1961 A.ct not permissible when in respect of the self-same escaped income, proceti- il:;I under section 34tl) of the 1922 Act had been .u'ndertak~n o.nd were pend- ---' ing 011 April 1, 1962 i.e. the date of coming into force of the 1961 A.ct- / ,. lncon1e Tux Act, 1961, Section 297(2) (d) (ii) refers to factual per.ding of a proceeding u11dcr section 34(1) of 1922 Act . . The appclloot·assessee is a firm carrying on business of manufacturing ico and preservation of potatoes in its cold storage. By an assessment order dated July 5, 1961 it was assessed to income tax for the .assessment year 1961-62 oo a total income of Rs. 53,548/-. The Income Tax Officer, in his proceedin~ started on Dcceraber 21, 1961 under section 34(1) of the 1922 Act, found certain property income and income to the -extent of one la·kh from potato tramaction put through in the name of benami persons by the assesseo bad escaped assessment and therefore, by his or

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