1997 (11) TMI 527 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was right in cancelling the reassessment made under s. 147(b) of the IT Act for the assessment year 1972-73.
2. Whether the Tribunal's view that there was no new information within the meaning of s. 147(b) of the IT Act for reopening the assessment for the year 1972-73 is based on valid and relevant material and is sustainable in law.

Issue 1: Reassessment Cancellation under s. 147(b)
The Tribunal initially cancelled the reassessment made by the ITO under s. 147(b) of the IT Act, asserting that there was no new information to justify reopening the assessment. The Tribunal's decision was based on the premise that the earlier decision regarding the disallowance of interest on borrowings from Canara Banking Corporation Ltd. should not be disturbed unless there were new facts to unsettle the previous decision. The Tribunal further reasoned that the reassessment was not justified as the ITO was perceived to be attempting to unsettle the earlier Tribunal decision without new facts.

Upon review, it was found that the Tribunal had not adequately examined whether there were new facts before the ITO when initiating the reassessment proceedings. The Tribunal's assumption that the ITO was trying to unsettle the earlier decision was deemed incorrect, as the reassessment was based on new information received after the original assessment. The High Court concluded that the Tribunal's decision to cancel the reassessment was not justified, as it failed to consider the new material facts presented by the audit party.

Issue 2: Validity of New Information for Reopening Assessment
The Tribunal held that the information provided by the audit party did not constitute new information within the meaning of s. 147(b) of the IT Act, and thus, the ITO had no jurisdiction to reopen the assessment. The Tribunal's reasoning was based on the belief that the audit party's report involved a disputable proposition of law rather than new facts.

The High Court disagreed with the Tribunal's conclusion, stating that the audit party had brought to the ITO's attention new facts that were not available during the original assessment. The audit report revealed that the funds borrowed by the assessee were utilized for the payment of estate duty and wealth-tax, which the ITO was unaware of at the time of the original assessment. The High Court emphasized that the audit party did not interpret the law but merely provided new factual information.

Moreover, the High Court referenced previous decisions, including Indian and Eastern Newspaper Society vs. CIT and A.L.A. Firm vs. CIT, to support the view that reassessment is justified when new facts are brought to the ITO's attention by the audit party. The Court concluded that the ITO had the jurisdiction to reopen the assessment based on the new information provided by the audit party.

Conclusion:
The High Court held that the Tribunal was not right in canceling the reassessment made by the ITO and that the Tribunal's view that there was no new information within the meaning of s. 147(b) of the IT Act was not justified. The Court answered the questions referred to it in the negative and in favor of the Revenue, thereby upholding the ITO's jurisdiction to reopen the assessment based on the new information provided by the audit party.