D.N.Sinha, J. - (1.) The facts in this case are shortly as follows; The petitioner is a private limited company incorporated under the Companies Act, 1956. The petitioner carries on the business of manufacturing razor blades. This application is concerned with a notice served upon the petitioner dated 22nd March, 1963 under Section 148 of the Income-tax Act, 1961, purporting to reopen the assessment of the petitioner for the year 1958-59. A copy of the said notice is annexure 'D' to the petition. It is stated in the notice that the Income-tax Officer had reason to believe that the income of the petitioner chargeable to tax for the assessment year 1958-59 had escaped assessment within the meaning of Section 147 of the said Act. It was therefore, proposed to re-assess the income of the petitioner in the said assessment year. With regard to the assessment and re-assessment, only one point has been canvassed before me and it will? be necessary to state certain facts to understand the same. It is alleged on behalf of the petitioner that it was a pioneer in this country in the field of manufacturing razor blade's and it found it difficult to effect sale of its manufactured good's. It is stated that sometime in the year 1954 a scheme was introduced giving incentive-bonus to dealers who sold the petitioner's goods in the market. Under the said scheme, bonus was payable to such dealers on the total quantity of blades sold by them during the year. Pursuant to the said scheme, the petitioner from the assessment year 1956-57 onwards provided in its profit-and-loss account for certain amounts which were payable-as incentive-bonus to the dealers as aforesaid. Reference is made to a resolution passed by the Board of Directors (at the meeting) held on the 22nd November, 1958, a copy whereof is annexed? to the petition and marked with the letter 'A'. That resolution runs as follows: -- "Resolved that the Bonus at the reduced rate of 14 Naya Paisa per packet amounting to Rs. 3,80,038/- allowed to dealers on the sales for the year 1957-58 be approved. However, it is observed that by reducing the rate of Bonus this year the sales have not in any way improved as expected, and as such with a view to serve as an incentive the Managing Director is authorised to increase the rate of Bonus upto 25 Naya Paisa per packet in future if thought necessary and desirable."
(2.) It is said that similar provisions were made for the subsequent assessment years. The following tabular statement sets out the position up to the assessment year 1960-61. JUDGEMENT_226_AIR(CAL)_1965Html1.htm
(3.) On or about 26th March, 1962 the Income-tax Officer, 'F' Ward, Company District II issued a notice under Section 34 of the Indian Income-tax Act, 1922 in respect of the assessment years 1957-58. Pursuant to the said notice the Income-tax Officer re-assessed the income for the said assessment years and disallowed the provisions for incentive-bonus on the ground that the same was in the nature of an ex gratia payment. The petitioner has appealed against the said assessment order to the Appellate Assistant Commissioner which appeal is still pending, on 23rd March, 1963 the petitioner was served with a notice dated 22nd March 1963, issued under Section 148 of the income-tax Act, 1961 for the assessment year 1958-59. Particulars thereof have already been set out above. In this application, it is this notice and the proceedings had thereunder which have been challenged. Sections 147 to 153 of the 1961 Act correspond to Section 34 of the 1922 Act. In the present case, the Income-tax Authorities are proceeding under Sub-section (b) of Section 147, the relevant provisions whereof are set out below:-- "147 (b) Notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recomputed the loss or the depreciation allowance, as the case may be, for the assessment year concerned";