1978 (6) TMI 41 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the Tribunal's decision regarding the initiation of proceedings under Section 34(1)(b) for the assessment year 1957-58.
2. Applicability of the principles laid down by the Supreme Court in Kalyanji Mavji & Co. v. CIT.
3. Whether the reopening of the assessment was based on a change of opinion or new information.

Issue-Wise Detailed Analysis:

1. Justification of the Tribunal's Decision Regarding the Initiation of Proceedings under Section 34(1)(b) for the Assessment Year 1957-58:

The Tribunal held that the proceedings initiated under Section 34(1)(b) for the assessment year 1957-58 were bad in law. The Tribunal observed that the ITO who issued the notice under Section 34(1)(b) was not the same ITO who made the original assessment for the relevant year. There was no indication on the record whether the latter ITO had referred to the trust deed and deliberately refrained from including the trust income in the assessment. The Tribunal concluded that the reopening was based on a change of opinion rather than any new information coming into the possession of the ITO in 1962.

2. Applicability of the Principles Laid Down by the Supreme Court in Kalyanji Mavji & Co. v. CIT:

The Commissioner argued that the Tribunal's decision was based on outdated precedents and should be reconsidered in light of the Supreme Court's decision in Kalyanji Mavji & Co. v. CIT. The Supreme Court had outlined four categories under which Section 34(1)(b) could be applied:
- Information derived from judicial decisions.
- Income escaping assessment due to oversight or mistake by the ITO.
- Information derived from external sources.
- Information obtained from the original assessment record through further investigation.

The Commissioner contended that the reopening of the assessment for 1957-58 fell within the second and fourth categories, as outlined by the Supreme Court.

3. Whether the Reopening of the Assessment was Based on a Change of Opinion or New Information:

The Tribunal's findings indicated that there was no copy of the trust deed on the assessee's file, and no mention of the trust deed in the assessment records except for the information in the 1939-40 return. The Tribunal inferred that the ITOs handling the assessments in earlier years must have formed an opinion regarding the nature of the trust. However, the High Court found that there was no material to show that a definite opinion had been taken on the revocability of the trust either by the officers of D-Ward or A-Ward before 1957-58. The High Court concluded that the reopening was based on the ITO's construction of the provisions of the trust deed, which constituted new information as per the Supreme Court's interpretation in Kalyanji Mavji & Co.'s case.

Conclusion:

The High Court held that the Tribunal's conclusions were erroneous. The reopening of the assessment for 1957-58 was justified under Section 34(1)(b) based on new information derived from the construction of the trust deed. The question referred to the High Court was answered in the negative and in favor of the department. The assessee was ordered to pay the costs of the reference to the Commissioner.