1984 (3) TMI 137 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment under Section 147(a) of the Income-tax Act, 1961.
2. Validity of reopening based on new material.
3. Finality of Tribunal's earlier order.
4. Legitimacy of the Income-tax Officer's (ITO) actions.

Detailed Analysis:

1. Reopening of Assessment under Section 147(a):
The primary issue in this case is whether the reopening of the assessment for the assessment year 1962-63 under Section 147(a) of the Income-tax Act, 1961, was valid. The original assessment was completed on 30-6-1964, and the assessment was reopened on the ground that a loan of Rs. 50,000 allegedly taken by the assessee was not genuine. The reassessment was challenged and set aside by the Appellate Assistant Commissioner (AAC) and subsequently quashed by the Tribunal. The ITO, however, reopened the assessment again based on a new statement from Shri Patodia.

2. Validity of Reopening Based on New Material:
The ITO's second attempt to reopen the assessment was based on a statement from Shri Patodia, who denied having advanced the loan and admitted to lending his name for a commission. The Tribunal noted that the ITO's belief of income escapement this time was based on concrete material-the sworn statement of Shri Patodia-rather than mere suspicion. The Tribunal emphasized that the new material provided a "live link" for the formation of the belief that the assessee's income had indeed escaped assessment.

3. Finality of Tribunal's Earlier Order:
The assessee argued that the Tribunal's earlier order, which quashed the reopening, had attained finality and should not be bypassed. The Tribunal referred to the Supreme Court's decision in CIT v. Rao Thakur Narayan Singh, which held that the ITO could not reopen an assessment on identical facts once the Tribunal's order had become final. However, the Tribunal distinguished the present case by noting that the reopening was based on new material, not the same facts as before.

4. Legitimacy of the Income-tax Officer's Actions:
The Tribunal addressed the legitimacy of the ITO's actions, stating that the ITO was not barred from making further enquiries and gathering new material. The Tribunal cited the Calcutta High Court's decision in Prahladrai Agarwalla v. ITO, which supports the ITO's right to make enquiries before reopening an assessment. The Tribunal concluded that the ITO's actions were neither mala fide nor based on a change of mood but were driven by new, concrete information.

Conclusion:
The Tribunal reversed the Commissioner (Appeals)'s order, holding that the reopening of the assessment was justified based on the new material. The case was restored to the Commissioner (Appeals) for reconsideration of the correctness of the addition on its merits. The Tribunal emphasized that the ITO's actions were legitimate and in accordance with the law, as they were based on new material and not a mere change of mood.