2001 (2) TMI 128 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of section 147(b) for reopening the assessment.
2. Determination of whether the receipt of the Matador van constitutes "income from business."
3. Examination of whether the reassessment was based on a "change of opinion."

Summary:

1. Applicability of section 147(b) for reopening the assessment:
The Revenue questioned whether the Tribunal was correct in holding that section 147(b) would not apply. The original assessment for the year 1985-86 was completed u/s 143(3) on August 6, 1986. The Income-tax Officer had noted the receipt of a Matador van valued at Rs. 1,05,000 from Asian Paints Ltd. for the assessee's outstanding performance. This amount was credited to the capital accounts of the partners and not included in the income. The assessment was later reopened u/s 147, and the Income-tax Officer included this amount as income. The Tribunal dismissed the Department's appeal, stating it was a "change of opinion," which does not justify reopening under section 147(b).

2. Determination of whether the receipt of the Matador van constitutes "income from business":
The Tribunal observed that the van was not gifted out of natural love and affection but was connected with the business performance of the assessee, thus forming part of the business receipts. However, the Tribunal dismissed the appeal on the grounds of "change of opinion." The Department argued that the receipt of the van, irrespective of being in cash or kind, falls under the "concept of income" within the Income-tax Act. They contended that the transfer to the capital account was erroneous and that reopening was justified based on a reconsideration of the law.

3. Examination of whether the reassessment was based on a "change of opinion":
The respondents argued that the reassessment was based on pre-existing material, not new information or a change of law. They cited several decisions, including CIT v. Dinesh Chandra H. Shah, H. Noronha v. ITO, CIT v. Indian Plastics and Chemicals P. Ltd., Jindal Photo Films's case, and VXL India Ltd. v. Asst. CIT, which emphasized that reassessment is only justified with new or additional material. The court noted that the Income-tax Officer had formed an opinion during the original assessment, as indicated by the note. The reassessment was based on pre-existing material, not new information, making it a "change of opinion," which is not permissible for reopening the assessment.

Conclusion:
The High Court upheld the Tribunal's decision, stating that the reassessment was a "change of opinion" based on pre-existing material, and thus, section 147(b) does not apply. The original opinion formed by the Income-tax Officer regarding the transfer to the capital account was evident, and no new information justified reopening the assessment.