1990 (11) TMI 198 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of Assessment under Section 147(a) and Section 147(b)/150.
2. Validity of Reassessment under Section 147(a).
3. Accrual and Taxability of Compensation Received.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147(a) and Section 147(b)/150:

The Income Tax Officer (ITO) proposed reopening the assessments for the assessment years 1956-57 and 1964-65 under Section 147(a) of the Income-tax Act, 1961. The ITO issued a notice under Section 148, stating that he had reason to believe that income chargeable to tax had escaped assessment. The original assessment for the year 1964-65 was completed on 26-3-1969. The ITO mentioned that the action under Section 147(b)/148 was within the period of limitation for reopening and was to give effect to the Tribunal's findings. The CIT(Appeals) justified the reopening under Section 147(a) and Section 150, pointing out that the Tribunal had observed that the amount was assessable in the assessment year 1964-65. The assessee's contention challenging the reopening was repealed by the CIT(Appeals).

2. Validity of Reassessment under Section 147(a):

The assessee argued that the assessment was reopened under Section 147(a) due to a typographical error and that all primary facts necessary for the assessment had been fully and truly disclosed. The balance-sheet filed by the assessee formed part of the return and disclosed all material facts relating to the compensation awarded by the Arbitrator. The Tribunal in previous orders did not give a clear finding that the amount of compensation was assessable in the assessment year 1964-65. The CIT(Appeals) rejected the assessee's contention, noting that the notice under Section 148 was served within the time limit prescribed by law. The Tribunal held that reopening the assessment under Section 147(a) was not justified as all material facts had been fully and truly disclosed during the original assessment proceedings.

3. Accrual and Taxability of Compensation Received:

The assessee contended that the compensation finally accrued on 24-11-1965, when the High Court determined the amount at Rs. 2,31,682. The CIT(Appeals) held that the sum of Rs. 1,47,109 was assessable as revenue receipt in the assessment year 1964-65. The Tribunal found that the right to receive compensation accrued only on 24-11-1965, when the High Court finally decided the matter, supporting the assessee's contention. The Tribunal referred to the Supreme Court's decision in CIT v. Hindustan Housing & Land Development Trust Ltd., which distinguished between cases where the right to receive payment is in dispute and those where only quantification is left. The Tribunal concluded that the amount of compensation or any part thereof was not assessable in the assessment year 1964-65.

Conclusion:

The Tribunal allowed the assessee's appeal, holding that the amount of compensation was not assessable in the assessment year 1964-65. The Revenue's appeal, which challenged the deletion of Rs. 55,972 by the CIT(Appeals), was dismissed. The Tribunal's decision emphasized the importance of the timing of the accrual of income and the necessity of fully disclosing material facts during the original assessment proceedings.