1988 (4) TMI 109 - AT - Income Tax

Summary

Issues Involved:
1. Validity of re-opening the assessment under Section 147(a) of the Income Tax Act.
2. Merits of the claim for deduction of Rs. 1,63,908 as collection charges under Section 24(1)(viii) of the IT Act.

Detailed Analysis:

1. Validity of Re-opening the Assessment under Section 147(a):
The primary issue in this appeal is whether the re-opening of the assessment under Section 147(a) of the Income Tax Act is valid. The Revenue contended that the re-opening was justified as new information was obtained post-assessment, revealing that M/s Orient Investment Pvt. Ltd. did not render any services to the assessee for the collection of rent, thus leading to an under-assessment.

The assessee argued that all primary facts were already disclosed during the original assessment and subsequent re-assessment under Section 147(b). They emphasized that the same set of facts were used to re-open the assessment under Section 147(a) without any new information. The assessee maintained that the ITO had made a thorough investigation initially, and no new facts were discovered post-assessment.

The CIT(A) annulled the re-opening under Section 147(a), stating that all necessary facts were disclosed during the original assessment, and the ITO's attempt to re-open under Section 147(b) had already failed. The Tribunal upheld this view, noting that the Revenue did not present any new information that was not already considered during the initial assessments and re-assessments. The Tribunal referenced the Supreme Court's ruling in Calcutta Discount Co. Ltd. vs. ITO, which clarified that the obligation of the assessee is to disclose primary facts, not inferential ones.

2. Merits of the Claim for Deduction of Rs. 1,63,908:
The second issue, concerning the merits of the deduction claim, was deemed relevant only if the re-opening under Section 147(a) was valid. Since the Tribunal found the re-opening invalid, the merits of the deduction claim were not adjudicated in this appeal.

The assessee had claimed a deduction of Rs. 1,63,908 as collection charges paid to M/s Orient Investment Pvt. Ltd. under Section 24(1)(viii). The Revenue argued that no services were rendered by M/s Orient Investment Pvt. Ltd., thus the deduction was unjustified. However, the Tribunal noted that the assessee had consistently maintained that M/s Orient Investment Pvt. Ltd. ensured the collection and realization of rents, which was sufficient to qualify as collection charges under the law.

The Tribunal observed that the CIT(A) had already examined the facts and concluded that the assessee's claim was justified. The Tribunal also noted that the Revenue did not challenge the merits of the deduction before the Tribunal during the appeal against the CIT(A)'s order.

Conclusion:
The Tribunal concluded that the re-opening of the assessment under Section 147(a) was invalid as no new information had come to the possession of the Department post-assessment. All primary facts were disclosed by the assessee during the original assessment and subsequent re-assessment under Section 147(b). Consequently, the Tribunal upheld the CIT(A)'s decision to annul the re-opening of the assessment and dismissed the Revenue's appeal.