COMMISSIONER OF INCOME TAX, U.P. vs. GURBUX RAI HARBUX RAI

CIVIL APPEAL No. 1225/1967Supreme Court[1972] 1 S.C.R. 35724 August 1971Bench: 2 JudgesAuthor: K.S. HEGDE, A.N. GROVER B D E F G H COMMISSIONER OF11 pages
AI SummaryAllowed

What did the Supreme Court hold?

The Tribunal held that the Excess Profits Tax Officer was competent to take action under both Section 10A and Section 15. Regarding the first issue, although notices under Sections 15 and 10A were issued on the same date, the order-sheet indicated that the notice under Section 15 was ordered to be issued first, satisfying the legal requirement of initiating proceedings under Section 15 before taking action under Section 10A. The assessee's failure to raise an objection regarding the order of issuance of notices in its reply further supported this finding. For the second issue, the Tribunal found that the information regarding the partial partition, as stated in the order of the Appellate Assistant Commissioner in income tax proceedings, constituted definite information that came into the possession of the Excess Profits Tax Officer. This information was relevant for the purpose of Section 15, and once proceedings under Section 15 were initiated, the officer had the jurisdiction to examine, for the purpose of Section 10A, whether the partition was effected to avoid or reduce excess profits tax liability. The appeals were allowed in favour of the Revenue.

What were the facts?

The assessee, Gurbux Rai Harbux Rai, a registered firm, was assessed for excess profits tax for the periods July 4, 1943 to June 21, 1944, and June 22, 1944 to July 10, 1945. The assessee claimed a reconstitution of its business due to a partial partition in the joint family of one partner, Gurbux Rai. The Income-tax Officer initially rejected this claim. However, the Appellate Assistant Commissioner, in income tax appeal proceedings, accepted the partial partition. Subsequently, the Excess Profits Tax Officer issued notices under Sections 10A and 15 of the Excess Profits Tax Act, 1940, on February 3, 1951. The officer later passed an order under Section 15 modifying the original assessment and an order under Section 10A, holding that the partition was primarily to avoid excess profits tax. The assessee appealed, arguing the officer lacked jurisdiction to reopen the assessment under Section 15 and to pass orders under Section 10A.

What were the issues?

1. Whether the Excess Profits Tax Officer was competent to apply the provisions of Section 10A and make a revised assessment under Section 15 of the Excess Profits Tax Act, 1940, given that notices under both sections were issued on the same date. - Assessee's contention: The officer was not competent to pass orders under Section 10A merely to adjust a revised assessment under Section 15, and the issuance of notices on the same date rendered the proceedings invalid. - Revenue's contention: The requirements of law were satisfied. 2. Whether there was any definite information in the possession of the Excess Profits Tax Officer by virtue of which he was competent to reopen the original assessment under Section 15. - Assessee's contention: All materials were before the officer during the original assessment, and no new information came into his possession thereafter, thus profits had not escaped assessment. - Revenue's contention: The decision of the Appellate Assistant Commissioner regarding the partial partition constituted definite information.

Which sections of the Income-tax Act were involved?

Section 10A,Section 15,Section 13,Section 34(1)(b)

AI-generated summary — verify with the full judgment below

A B D E F G H COMMISSIONER OF INCOME TAX, U.P. v. GURBUX RAI HARBUX RAI August 24, 1971 (K. S. HEGDE AND A. N. 0,ROVER, JJ.J Excess Profits T~x Act, 1940, ss. JOA and J5-Scope of. 357 "- Section 10~ of the 'Excess Profits Act, 1940, deals \vi th transactiOns _ deyigned to avoid or reduce liability to excess profits tax and emgN-.vcrs the .Excess Profits Tax Officer to n1ake appropriate adjustments as respects liability t~xcess profits tax.

But before any action can be taken uJ?,Qer , the section, there should be pending a proceeding for assessment or re- assessment of excess- Profits tax. Under s. 15, if in consequence of definite jnformation .\Vhich has come into his possession,~ the Excess Profits Tax OffiCer discovers that the profits of any chargCable accounting "period have escaped assessment, he Q1ay serve a notice on the as!'essee and proceed to assess the profits liable to excess profits tax. _ ""' __ Jn the present case, the Appellate Assistant Commissioner, in appeal from the Income-tax Officer order, stated that there was a partial partition in the family of one of the partners of the a'ssessee.

On the basis of that order, the Excess Profit

The order continues below.

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