1981 (6) TMI 65 - AT - Income Tax

Summary

Issues:
Validity of reassessment proceedings initiated under s. 147(b) r/w s. 148 of the IT Act.

Analysis:
The appeals before the Appellate Tribunal ITAT Gauhati revolved around the validity of reassessment proceedings initiated by the Income Tax Officer (ITO) under s. 147(b) of the IT Act. The ITO initiated the reassessment on the grounds that the assessee had incorrectly deducted the fair market value of property as on 1st April, 1970, instead of 1st Jan., 1954, resulting in under-assessment of income. The Revenue Audit pointed out this mistake, leading the ITO to believe that taxable income had escaped assessment, justifying the reassessment.

The assessee contended that the initiation of proceedings under s. 147(b) was unwarranted, as the value adopted for capital gains computation was based on the date the agricultural lands became capital assets, post an amendment in the definition of capital asset under the IT Act. Citing the decision in Indian and Eastern Newspaper Society vs. CIT, the assessee argued that the initiation of proceedings was unjustified. The Appellate Tribunal noted that the ITO's decision was solely based on the Audit's observation, without any new facts emerging. The Tribunal agreed with the assessee's interpretation of the law regarding the date for ascertaining cost price, emphasizing that it was a legal matter.

The Revenue, however, contended that the Audit's role was merely to point out factual errors, not legal ones, and that the ITO was correct in relying on the Audit's interpretation. They argued that the property was a capital asset even before the relevant amendment, and thus, the reassessment was justified. The Tribunal disagreed, stating that the initiation of reassessment based solely on the Audit's observation was not valid. They upheld the assessee's argument regarding the correct interpretation of the law and dismissed the Revenue's appeals.

In conclusion, the Appellate Tribunal dismissed the appeals by the Revenue, affirming the cancellation of the reassessment proceedings by the AAC. The Tribunal's decision hinged on the correct legal interpretation of the relevant provisions, emphasizing that the initiation of reassessment based on a mistake pointed out by the Audit was not justified under the circumstances.