1999 (11) TMI 49 - HC - Income Tax

Summary

Issues Involved:

1. Justification of the Tribunal in holding that there was no material or information for reopening the assessment under section 17 of the Wealth-tax Act.
2. Validity of the Tribunal's decision that the lands in question were agricultural lands on the relevant dates.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal in holding that there was no material or information for reopening the assessment under section 17 of the Wealth-tax Act:

The assessments for the years 1965-66 to 1968-69 were reopened by the Wealth-tax Officer based on information from the internal audit party. The appellate authority found that the reopening was not due to the assessee's failure to disclose material facts but was based on the internal audit report. This led to the conclusion that the reopening fell under section 17(1)(b) of the Act, which requires notice within four years from the end of the assessment year. Notices were issued on March 16, 1975, and served on March 21, 1975, making the reopening for the years 1965-66 to 1967-68 time-barred. The appellate authority also noted that the Wealth-tax Officer did not independently verify the information, relying solely on the audit party's opinion, which is not valid grounds for reopening as per the Supreme Court's decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996. Thus, the Tribunal upheld that the reopening was invalid for all years, including 1968-69, as the audit report did not constitute "information" under section 17(1)(b).

2. Validity of the Tribunal's decision that the lands in question were agricultural lands on the relevant dates:

The assessee had consistently reported the land as agricultural, with income from it being shown as Rs. 300 to Rs. 400 per annum, which was accepted by the Income-tax Officer. The appellate authority considered various pieces of evidence, including the Special Deputy Tahsildar and Collector's reports, which described the land as a "full field" with garden cultivation and various crops. Despite the land being described as a vacant site in a trust deed and acquired for non-agricultural purposes later, the Tribunal found that the land was agricultural during the relevant assessment years. The Tribunal also noted that the Wealth-tax Officer reopened the assessment based solely on the internal audit report without independent verification, which is not permissible. The Supreme Court's guidelines in Sarifabibi Mohmed Ibrahim v. CIT [1993] 204 ITR 631 and CIT v. Gemini Pictures Circuit Pvt. Ltd. [1996] 220 ITR 43, which emphasize a cumulative consideration of all relevant facts to determine the nature of the land, supported this conclusion. Therefore, the Tribunal correctly held that the land was agricultural on the relevant dates.

Conclusion:

The common questions of law were answered in the affirmative and against the Revenue, affirming the Tribunal's decisions on both issues. The reopening of assessments was invalid due to reliance on the internal audit report, and the land was correctly classified as agricultural during the relevant years. No order as to costs was made.