1990 (2) TMI 103 - AT - Income Tax

Assessment Proceedings, City Compensatory Allowance, High Court, Reassessment Proceedings, Total Income

Summary

Issues:
1. Validity of reopening assessment under section 147(b) of the Income-tax Act, 1961 based on a change of opinion by the Income-tax Officer.
2. Interpretation of the term "information" in the context of section 147(b) for initiating reassessment proceedings.

Detailed Analysis:

Issue 1: Validity of reopening assessment under section 147(b)
The appeal challenged the order of the Appellate Assistant Commissioner upholding the Income-tax Officer's decision to reopen the assessment under section 147(b) of the Income-tax Act, 1961. The Appellate Tribunal found that the grievance of the assessee was well-founded as the impugned assessment was made on a change of opinion by the Income-tax Officer. The Tribunal emphasized that the original assessment was completed after accepting the claim made by the assessee regarding Additional D.A. and City Compensatory Allowance not being included in the total income based on a judgment of the Madhya Pradesh High Court. The Tribunal held that a change of opinion on this issue could not constitute valid grounds for reopening the assessment under section 147(b) and, therefore, the reassessment was deemed bad in law. Consequently, the Tribunal canceled the reassessment and restored the status quo ante.

Issue 2: Interpretation of the term "information" in section 147(b)
The Tribunal referred to legal precedents to interpret the term "information" in the context of section 147(b) of the Income-tax Act, 1961. It noted that the Hon'ble Supreme Court had clarified that a mere change of opinion by the Income-tax Officer does not constitute valid information to initiate proceedings under section 147(b). The Tribunal highlighted that the law as explained by the Supreme Court in relevant judgments established that information must be derived from an external source concerning facts or law relevant to the assessment. The Tribunal emphasized that if the Income-tax Officer had already considered and accepted a particular position during the original assessment, a change of opinion on the same issue during reassessment does not qualify as valid information for reopening the assessment. Therefore, the Tribunal concluded that the reassessment based on a change of opinion was not legally sustainable and ordered the cancellation of the reassessment.

In conclusion, the Appellate Tribunal allowed the appeal, setting aside the reassessment order and reinstating the original assessment, without making any judgment on the merits of the case.