1982 (6) TMI 95 - AT - Income Tax

Summary

Issues:
Reopening of assessment under section 147(b) of the IT Act 1961 based on income of minor sons escaping assessment.

Detailed Analysis:

Issue 1: Reopening of Assessment under Section 147(b)
The appeal challenged the order of the Additional Commissioner of Income Tax (AAC) upholding the Income Tax Officer's (ITO) decision to reopen the assessment under section 147(b) of the IT Act 1961. The ITO reopened the assessment based on the belief that income of the minor sons of the assessee had escaped assessment. The ITO justified the reopening by claiming that a predecessor had erred in not including the income of the minor sons for a specific period from the firm of M/s R.B. Sondhi & Co. The ITO completed the reassessment by including the income of the minor sons, which was confirmed by the AAC.

Issue 2: Change of Opinion
The counsel for the assessee argued that the reassessment was a mere change of opinion, which is impermissible under the law. It was contended that the ITO did not have any new information post the original assessment to justify the reopening. The counsel relied on the Supreme Court judgment in Indian & Eastern Newspapers Society vs. CIT to support the argument that the reassessment was void. Additionally, the counsel cited various judgments, including CIT vs. Killick Industries Ltd and Anil Starch Products Ltd vs. ITO, to strengthen the contention that the reassessment was based on an impermissible change of opinion.

Issue 3: Justification for Reopening
The revenue contended that the reassessment was justified as the audit party had pointed out the legal basis for including the income of the minor sons based on relevant judgments. The revenue argued that the ITO's decision to reopen the assessment was valid as he had determined the profit attributable to the minor sons from the firm of M/s R.B. Sondhi & Co. The counsel for the assessee, in response, reiterated that the information provided by the audit party was merely an opinion and did not constitute new information under the law.

Judgment:
The Tribunal held that the ITO's action was a change of opinion based on facts already considered by his predecessor. The Tribunal emphasized that the ITO's discovery of an error during the original assessment did not empower him to reopen the assessment under section 147(b). Citing the Supreme Court's decision in Indian & Eastern Newspapers Society, the Tribunal concluded that the reassessment was unwarranted and set aside the orders of the lower authorities. The appeal of the assessee was allowed, restoring the status quo ante.