- (1.) AMRITSAR Swadeshi Woollen Mills, the assessee, was a partnership firm and during the proceedings for the assessment year 1973-74, the Income-tax Officer noticed that there were debit balances in the accounts of two partners to the tune of over Rs. three lakhs and interest was not being charged on these debit balances of these partners whereas the assessee-firm had paid substantial interest to its creditors. On taking note of the aforesaid facts, he scrutinised the assessment records for the earlier three years and noticed that for those years also there were huge debit balances in the accounts of those partners. Although the assessment for the assessment year 1972-73 had already been completed, the Income-tax Officer issued notice under Section 148 read with Section 147 (b) of the Income-tax Act, 1961 (hereinafter called "the Act" ). The assessee challenged the jurisdiction of the Income-tax Officer to reopen the assessment on the ground that there was no material before the Income-tax Officer to do so as all facts were already before him when the original assessment was framed and on mere change of opinion, reassessment proceedings could not be started.
(2.) THE Income-tax Officer did not agree with the objections of the asses-see and on reassessment added Rs. 35,413 as income by way of interest on the debit balance at the rate of 12 per cent. per annum after recording a finding that the aforesaid amount had escaped assessment.
(3.) THE assessee challenged the reassessment by filing an appeal before the Appellate Assistant Commissioner who accepted the assessee's contention on merits and deleted the addition but held that the reassessment proceedings under Section 148 read with Section 147 (b) of the Act were properly initiated.;