1988 (12) TMI 16 - HC - Income Tax

Agricultural Land, Capital Gains, Information That Income Has Escaped Assessment, Reassessment

Summary

Issues: Reopening of assessments under section 147(b) of the Income-tax Act, 1961 for the assessment years 1967-68, 1968-69, and 1969-70; Chargeability of lands as agricultural lands and tax implications under section 45 of the Income-tax Act, 1961.

Analysis:

The assessee filed income-tax returns for the mentioned assessment years, claiming that the sale of land was of agricultural nature and hence not subject to capital gains tax. The Income-tax Officer initially did not impose capital gains tax. However, the successor reopened the assessments under section 147 of the Income-tax Act, alleging that income had escaped assessment. The objections raised by the assessee were dismissed by the authorities.

The Income-tax Appellate Tribunal consolidated the appeals related to the reopening and the assessment for 1970-71. It was found that there was no failure on the part of the assessee to disclose all material facts, thus the assessments could not have been reopened under section 147(a). The Tribunal considered an audit note as information under section 147(b), leading to the reopening proceedings.

The Supreme Court's judgment in Indian and Eastern Newspaper Society v. CIT was referenced, emphasizing that information under section 147(b) should pertain to law created by a formal source. The audit note in question expressed an opinion rather than providing new information. It was concluded that the audit note did not constitute information within the meaning of section 147(b), and the reassessment amounted to a impermissible change of opinion.

The judgment also addressed the second issue related to the chargeability of lands for the assessment year 1970-71. Following the precedent in CIT v. V. A. Trivedi, the court ruled in favor of the Revenue, indicating that the lands were not agricultural and the sale proceeds were rightly chargeable to capital gains tax under section 45 of the Income-tax Act, 1961.

In conclusion, the first question regarding the reopening of assessments for the mentioned years was answered in favor of the assessee, while the second question for the assessment year 1970-71 was answered in favor of the Revenue. No costs were awarded in the judgment.