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TMI Blog1986 (5) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the commissioner [Appeals] challenging [1] the validity of the reopening of the assessment, and [2] the quantum of wealth determined. 3. The commissioner has not accepted the assessee's appeals. The present appeals have, therefore, been filed by the assesses before the Tribunal against the orders of the Commissioner [Appeals]. 4. To appreciate the reasoning on which the grievance of the assessee is based, it would be appropriate at this stage to note the facts of the cases first. We will mention the facts of Anurag Dalmia Family Trust first. Shri Vishnu Hari Dalmia created the trust known as 'Anurag Dalmia Family Trust' vide trust deed dated6-6-1964. Shri Jaidayal Dalmia Shri Parmeshwar Prasad Bogla and Shri Jagdish Prasad Poddar were appointed trustees vide this trust deed. The settlor transferred to the aforesaid trustees 70 per cent shares of Hari Bros. [P.] Ltd., Scindia House,New Delhiand directed the trustees vide clause 2 of the trust deed to divide the trust fund into two moeities. One moiety together with the accretions thereto less the outgoings such as expenses for carrying on the trust, taxes, etc., and the amounts expended therefrom in the manner provided for in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the birth of the first child and the completion of 18 years for the date hereof, at the discretion of the trustees; but if the said Part B of the trust fund has not been made over to any child of the said Anurag Dalmia as aforesaid and no child of the said Anurag Dalmia is in existence at the expiry of 18 years from the date hereof, the said Part B of the trust fund shall be made over to the wife of Anurag Dalmia at the expiry of 18 years from the date hereof or on the death of the said Anurag Dalmia if he dies childless before the expiry of 18 years from the date hereof; and if no wife of the said Anurag Dalmia be living at the expiry of 18 years from the date hereof the said part B of the trust fund shall be disposed of in accordance with the provisions of sub-paragraph [ii] below. A child on ventra so mere if and when born shall be deemed to be a child in existence for the purposes of this deed; [ii] if the said Anurag Dalmia dies unmarried within a period of 18 years from the date of this deed, then on his death; or, if he does not marry till the compilation of 18 years from the date of this deed; the said Part B of the trust fund shall be settled and disposed of absolutel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia and the following person were the trustees : 1. Shri Jaidayal Dalmia. 2. Smt. Aruna Dalmia. 3. Shri Ghanshyam Kejriwal. 100 full paid ordinary shares of Rs. 100 each of Hari Bros. [P.] Ltd. were the trust property which were settled on trustees by the settler. Vide clause 2 of the deed, the trustees were directed to divide the trust fund into two moieties, referred to as Part A and Part B of the trust fund, as in the case of Anurag Dalmia Family Trust. Part A of the trust fund vide clause 3 of the trust deed was to be distributed and/or applied by the trustees at the close of the trust period in the manner provided in clause 4 and the said clause 4 reads as below : "The said Part A of The trust fund shall be settled and disposed of by the trustees at the close of the trust period as defined in paragraph 3 above in the manner following namely : [i] if the said Parag Dalmia marries within 18 years from the date here of the said part A of the trust fund shall be settled and disposed of absolutely of the wife of the said Parag Dalmia on her marriage; [ii] if the said Parag Dalmia dies unmarried within a period of 18 years from the date of this deed, then on his death; or, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trustees or following persons and purposes in such proportion as the trustees think proper. 'All the children of Archana Dalmia [sister of Parag Dalmia] all the children of the brothers of the settlor; who my be in existence on the said date, and for any religious purposes or charitable purposes as relief of the poor, education, medical relief and advancement of any other object of general public utility.'". Clauses 7 and 8 of the trust deed provided for the disposal of the income of the trust fund during the trust period and the same read as below : "7 During the trust period as defined in paragraph 3 above in respect of the said Part A of the trust fund, or any part thereof may until it is finally vested in accordance with the provisions of paragraph 3 and 4 above, be applied at the discretion of the trustees, for all or any of the following purposes, namely, the benefit maintenance, health, recreation or education of or for making ornaments, jewellery or apparel or acquiring any other articles or movable or immovable properties for the use of benefit of the girl to whom the said Parag Dalmia shall be betrothed, and the balance, if any, of the income of the said part A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s side, there is reference to trust fund Part A and to trust fund Part B. From a perusal of the assessment order originally made by the WTO, it appears that the said assessment was completed by the WTO exception the assessee's returned wealth and, there is no reference in the body of the assessment order to the various clauses of the trust deed and two parts of the trust fund as noted above. 9. It appears that some time after the assessments had been completed as above, internal audit party audited the assessments made and they pointed had not been taken of the various provisions of the trust deed and of the fact that the shares of the beneficiaries in the trust in question were indeterminate. On receipt of the said audit notes, the WTO appears to have examined his re cord once again and after being convinced that what was being pointed out to him was correct, he initiated proceedings under section 17[1] [b] against both the trusts. The reasons recorded are more or less similar and it will, therefore, do it we take note of the reasons recorded in the case of one of the trusts, namely, Parag Dalmia Family Trust. The said reasons appeared at page 4 of the paper book and read as belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAC pointed out that the shares of the beneficiaries were entirely discretionary depending on the discretion of the trustees and the same were not determinate. Therefore, in respect of Part B, it was held by the learned AAC that the appellant trust was not entitled to deduction under section 5[1A]. 10. The present appeals have been filed by the assesses against the aforesaid orders of the learned AAC. On merits, the learned counsel for the assessee was fair enough to concede that he could not dispute the finding of the learned AAC with regard to Part B of the trust fund in both the case. We confirm this finding. The shares of the beneficiaries in part B of the trust fund are indeterminate. So far as Part A was concerned, the AAC had already accepted the assessee's submission that the shares of the beneficiaries were determinate and the revenue not being in appeal against the said finding of the AAC, the said finding had to stay and it is not the scope of the present appeals to go into the character of Part A of the trust fund. Part B of the trust funds are, however, liable to be assessed under sub-section [4] of section 21 as the shares of the beneficiaries therein were entirely i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the statue, he reopened the assessments and such reopening was valued as per their Lordships of the Hon'ble Supreme court vide Indian & Easter newspaper Society's case itself. To presume that the WTO had examined the trust deed was, on the facts of the present case, totally erroneous because whatever had been before the WTO was mentioned by him in his order and a perusal of the original assessment order would clearly show that he did not go through the provisions of the trust deed enumerated above and his mind was not cognizant of two parts of the trust funds one being determinate and the other being indeterminate. He, therefore, urged that we should uphold the validity of the initiation of proceedings in the present cases. 13. We have given careful consideration to the facts of the case and the rival submissions. We have also gone through the judgments of their lordships of the Hon'ble Supreme Court in the case of Indian and Eastern Newspaper Society at pages 1000 and 1001 of the aforesaid judgment, their Lordships have quoted with approval the observation of the Hon'ble Supreme Court in the case of CIT v. A. Raman & Co. [1968] 67 ITR 11 wherein the scope of the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law, which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO." Thus, what has to be seen in the present case is as to whether the ITO himself examined the law as contained in section 21(4) and applied that to the fact of the case or whether he was guided by the information of the audit party alone. In this case, the WTO had not originally noted the various proceedings of the trust deeds which went to show that part A was determinate and part B was indeterminate. The information as to this aspect of the matter could be had only by examining the trust deeds which were examined by the WTO only after receiving audit note. After examining the said provision of the trust deed, it became cle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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