Ajit K.Sengupta, J. - (1.) At the instance of the Commissioner of income-tax, the following question of law has been referred to this court under Section 256(1) of the Income-tax Act, 1961 ("the Act"), for the assessment year 1969-70 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the proceedings under Section 147 (b) Of the Income-tax Act, 1961, were not according to law."
(2.) The facts are that the assessee, James Finlay and Co. Ltd., is a company incorporated in the United Kingdom and it carries on business in India having branches in Calcutta and Bombay. The Calcutta office acts as agent for various tea and steamer companies incorporated outside India as also for other overseas principals. The Bombay office acts as agent for Lloyds' insurance companies and steamer companies. Both the offices deal in sundries, electrical and other goods. The Bombay branch has in the course of its business advanced in 1963 a sum of Rs. 7.50 lakhs to Speciality Papers Ltd. for whom it was appointed as selling agents. The interest due on this advance was credited to the profit and loss account of the Bombay branch till December 31, 1967. The debtor-company had not paid any interest or repaid to the principals except anything Rs. 56,000. From January 1, 1968, the debtor-company did not credit the interest to the profit and loss account but was showing it in the suspense account and this position continued till the assessment year 1970-71. On December 1, 1969, Speciality Papers Ltd. addressed a letter to the assessee for the settlement of the outstanding loan of Rs. 11.65 lakhs on payment of Rs. 10 lakhs in one instalment and the assessee agreed to forgo all interest accrued up to December 81, 1969. On December 15, 1969, the assessee wrote to Speciality Papers Ltd. that in waiving outstanding interest, commission, etc., sufficient concession had been made and they were not agreeable to any further writing off of the amount of loan On February 3, 1971, Speciality Papers Ltd. offered some instalment plans for repayment of the principal amount of Rs. 11.65 lakhs but urged that the interest and commission which accrued in favour of the assessee-company should be waived. The assessee-company was not satisfied at the instalments remaining unpaid. In August, 1971, the debtor-company was taken over by the Jatia Group and the new management was requested by the assessee-company to pay interest on the loan up to December 31, 1967, because the interest accrued up to that stage had already suffered tax in the assessee's hands ; and, on December 31, 1971, the entries in the suspense account relating to interest were reversed. In the proceedings for reassessment to tax for the assessment year 1969-70, the Income-tax Officer included Rs. 57,234 stating as follows : "Interest credited in the interest suspense account charged on the loan advanced to Speciality Papers Ltd.. . . Rs. 57,234."
(3.) When the assesses went up in appeal before the Appellate Assistant Commissioner, it was contended before him on behalf of the assessee that it had furnished all particulars and that no new information came to the knowledge of the Income-tax Officer after the original assessment was completed. Thus, it was urged that the Income-tax Officer had no jurisdiction to reopen the assessment. The Appellate Assistant Commissioner rejected the contention of the assessee, holding as follows : "I have looked into the facts, It is seen that the assessment has been reopened under Section 147(b). Though the appellant's argument is that they had furnished all particulars and the reopening is without jurisdiction, it is not correct. The jurisdiction is validly assumed. I have no reason to interfere.";