MADHAVAN NAIR R Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Cochin Bench has referred to this Court under S.256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) the following question:-

(2.) The assessee preferred an appeal before the Appellate Assistant Commissioner of Income Tax, Ernakulam. That appeal was allowed by the Appellate Assistant Commissioner holding that the only provision under which the Income tax Officer could validly withdraw the Development Rebate that had been already allowed was S.155(5) of the Act and that inasmuch as the time limit prescribed by the said Section had elapsed long prior to the date on which the order withdrawing the development rebate was passed by the Income Tax Officer in purported exercise of his power under S.143(b) the reassessment proceedings were illegal. In the view of the Appellate Assistant Commissioner S.155(5) being a special provision specifically dealing with the withdrawal of the development rebate the applicability of S.147 which is a general provision is excluded in respect of cases covered by S.155(5). On this basis the Appellate Assistant Commissioner held that it was not legally open to the Income Tax Officer to take resort to the general provision for assessment of escaped income contained in S.147 when the time limit prescribed by S.155(5) had already expired and he accordingly cancelled the order of reassessment passed by the Income Tax Officer.

(3.) The Department took up the matter in further appeal before the Income Tax Appellate Tribunal. The Tribunal held that S.147(b) and 155(5) are not mutually exclusive and that the Income Tax Officer was not bound to act only under S.155(5) in a case where the development rebate already allowed was found to be liable to be withdrawn on the ground that there was a transfer of the machinery within the stipulated period of 8 years. The assessee put forward a contention before the Tribunal that the conversion of the proprietary business into partnership concern did not involve any transfer. This contention was rejected by the Tribunal. In the light of the aforesaid findings the Tribunal set aside the order of the Appellate Assistant Commissioner and restored the reassessment order passed by the Income Tax Officer.