1983 (10) TMI 97 - AT - Income Tax

Issues Involved:

1. Reopening of assessments under section 147(a) and 147(b) of the Income-tax Act, 1961.
2. Validity of reassessment proceedings based on the share factor.
3. Validity of reassessment proceedings based on the additional compensation factor.
4. Limitation period for completing reassessment.
5. Disclosure of material facts by the assessees.

Issue-wise Detailed Analysis:

1. Reopening of Assessments under Section 147(a) and 147(b):

The original assessments for the assessment year 1971-72 were reopened under section 147(a) and reassessments were made. The AAC upheld the reassessments for some assessees and set aside the reassessments for others. The first notice issued on 31-3-1975 was under section 147(b) and related to the additional compensation factor. The second notice issued on 21-12-1978 was under section 147(a) and related to the share factor. The AAC found that the first notice was under section 147(b), and this was not disputed by the departmental representative.

2. Validity of Reassessment Proceedings Based on the Share Factor:

The second notice issued on 21-12-1978 was based on the share factor, stating that the assessees wrongly claimed a one-fifth share each while they were actually entitled to a one-fourth share each. The AAC held that the reassessment proceedings initiated by the second notice were not valid as the share factor was not a new item of information before the ITO. The assessees had disclosed all material particulars at the time of the original assessment, including the fact that Ammalukutty Amma had predeceased A. P. Menon. The reassessment under section 147(a) could not be sustained as the assessees had placed all necessary particulars before the ITO.

3. Validity of Reassessment Proceedings Based on the Additional Compensation Factor:

The first notice issued on 31-3-1975 related to the additional compensation factor. The AAC found that the reassessment made on 24-3-1979 could not be supported on the basis of the first notice as the period of limitation expired on 11-4-1976. The department could not claim the reassessment was within the period of limitation for the first reopening. The reopening under section 147(a) as per the second notice was not valid as the assessees had disclosed all material particulars at the time of the original assessment. The reopening could not be sustained on the ground of the additional compensation factor as the ITO was aware of both the share factor and the additional compensation factor at the time of the first reopening.

4. Limitation Period for Completing Reassessment:

The period for completing the reassessment under section 147(b) expired on 11-4-1976, and the reassessment made on 24-3-1979 could not be supported. The AAC held that the reassessment proceedings initiated by the second notice were not valid as the share factor was not a new item of information before the ITO.

5. Disclosure of Material Facts by the Assessees:

The assessees had disclosed all material particulars at the time of the original assessment, including the fact that Ammalukutty Amma had predeceased A. P. Menon. The ITO should have verified the correctness of the claim made by the assessees with regard to the quantum of the shares by referring to the relevant provisions of the Hindu Succession Act. The reassessment could not be reopened on the ground that the assessees had not disclosed fully and truly all the material facts necessary for making the assessment.

Conclusion:

The appeals by the assessees (IT Appeal Nos. 588 and 589) were allowed, and the appeals by the department (IT Appeal Nos. 37, 38, and 39) were dismissed. The reassessments could not be sustained as the assessees had disclosed all material particulars at the time of the original assessment, and the period for completing the reassessment under section 147(b) had expired.

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