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TMI Blog1985 (7) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... ous years. However, the ITO assessed him treating the financial year as the previous year originally. The assessee filed appeals before the AAC and has agitated the correctness of determining the financial year as the previous year instead of the calendar year. The contention of the assessee about fixing the calendar year as the previous year was accepted by the AAC for the assessment year 1972-73 on 22-10-1975 and for the assessment year 1973-74 on 25-2-1977. The revenue did not accept the correctness of these decisions passed by the AAC and, therefore, it had taken the matters in second appeal to the Tribunal. The Tribunal by its orders dated 28-2-1977 for the assessment year 1972-73 and 28-9-1978 for the assessment year 1973-74 confirmed the orders of the AAC as regards fixing the financial year as the previous year for each of the assessment years, viz., 1972-73 and 1973-74. The revenue did not accept even the Tribunal's orders mentioned above. It had filed references which were granted and proceedings relating to the assessment years 1972-73 and 1973-74 have been pending before the High Court. 3. For the assessment year 1974-75, the assessee consistent with his stand for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years 1972-73 and 1973-74. Thus, disregarding all the objections raised for reopening, the ITO passed a reassessment order dated 29-4-1982 under sections 143(3), 147(b) read with sections 150 and 151(2) of the Act determining the total income of the assessee at Rs. 2,36,230. 8. Aggrieved against the said order of the ITO the assessee had taken the matter in appeal to the Commissioner (Appeals). Again validity of the reopening was questioned especially in view of the availability of the order of the AAC dated 20-10-1975 for the assessment year 1972-73, at a time when the original assessment for the assessment year 1974-75 was passed on 7-3-1977. The learned Commissioner (Appeals) countenanced this argument but did not accept it. He held that taking into account the consistent stand taken by the department that the financial year should be taken as the previous year in respect of salary income, the ITO who completed the original assessment did not follow the modificatory order for the assessment year 1972-73 which itself was in appeal before the Tribunal. However, at the stage of reassessment proceedings, the Tribunal's order rejecting the departmental appeals against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nough information available to the ITO when he issued notice under section 148 intending to assess the alleged escaped income for the assessment year 1974-75. The assessee while filing his return on 1-7-1974 had disclosed his salary income which he got for the calendar year of 1973. Therefore, the information which the ITO purported to be having at the time of notice is an information which he was already having even before passing the original assessment order for the assessment year 1974-75 on 7-3-1977. The learned advocate for the assessee contended that on 30-12-1975 itself, the ITO gave effect to the appellate order of the AAC regarding the assessment year 1973-74 treating the calendar year as the previous year. The ITO should have followed the said order while making his original assessment for the assessment year 1974-75 which is now under appeal. It is no doubt true, the learned advocate argued, that the department did not accept the decision of the AAC as regards the previous year to be adopted and took the matter in appeal to the Tribunal. However, it is noteworthy that the department did not succeed before the Tribunal which by its order dated 28-9-1978 merely confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not deal with information having been obtained from an order for a different assessment year and, thus, it does not apply to the facts of the case. He contended that nowhere in the Explanation any mention is made about section 147(b) and so it does not deal with information and, hence, it is of no help to the department. He argued that a finding that an amount should be assessed in another assessment year would be valid under Explanation 2. But the Explanation does not deem any non-existing direction as a direction. According to him there is no deeming of a finding which can be culled out from the said Explanation. 10. As against all the above arguments, the learned departmental representative, Shri Santhanam argued that when an appeal is filed against the AAC's order of 22-10-1975 and when once the department did not accept the correctness of the said decision it would not constitute information within the meaning of section 147(b). He referred us to the Supreme Court decision in Grindlays Bank Ltd. v. ITO [1980] 122 ITR 55 where it is held that the High Court while quashing the assessment can validly direct the ITO to redo the assessment even while exercising its writ juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -5-1945. In the meanwhile the ITO following the view that there was no disruption of the family on 19-5-1945, assessed the entire income in the hands of the bigger HUF for the four assessment years mentioned above. When the matter ultimately went to the Tribunal following its own view about the partition in the family recognised by its order dated 31-8-1954 it had allowed the appeals filed by the bigger HUFs and issued direction to the ITO to make fresh assessment as against the smaller units. In pursuance of this direction, the ITO took the sanction of the Commissioner and initiated proceedings under section 34 of the Indian Income-tax Act, 1922 ('the 1922 Act'). Sanction was accorded and notices were issued and assessments were completed. It was contended that as returns were already filed by the smaller HUFs and when they were still pending and when valid assessment under section 23 of the 1922 Act should have been made the proceedings under section 34(1)(b) were invalid. Examining this contention, the Allahabad High Court held that they are clearly of the view that in the circumstances it is wrong to say that the returns had not been acted upon and were still pending when the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise question came up for consideration before the Bombay High Court in CIT v. Kishoresinh Kalyansinh [1960] 39 ITR 522 and the Bombay High Court took the view that the proviso had been enacted merely by way of abundant caution. If this view is accepted it will not be necessary to comply with the conditions prescribed in the enacting portion of section 34. If they were not complied with it would make no difference to the validity of the fresh assessment as that assessment would be in a class by itself and would not require those conditions to be satisfied; it would be sufficient that the assessment had been completed in consequence of the directions of the appellate authority." 12. Therefore, it can be seen that according to the Bombay High Court decision cited in the excerpt given in CIT v. Kishoresinh Kalyansinh Solanki [1960] 39 ITR 522 the assessment order that is to be framed as per the directions given by an appellate authority is altogether a different proceeding and while framing such an assessment the conditions prescribed in the enacting provision of section 34 of the 1922 Act which is equivalent to section 147 of the 1961 Act, need not be complied with. It is made clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the AAC for the assessment year 1962-63, the AAC by his order dated 17-9-1966 held that the beneficiary could not be assessed in respect of the entire income from the trust and that he was to be assessed only in respect of the actual receipt from the trust. He further held that the trust was to be assessed on the balance of the income at the rate applicable to an AOP. On 27-3-1967, the ITO issued a notice under section 148 read with section 147(b) for reopening the assessment of the assessee-trust for the assessment year 1962-63 on the ground that upon receipt of the order of the AAC dated 17-9-1966, in the case of the beneficiary for the assessment year 1962-63, the income of the trust had escaped assessment. The Bombay High Court held ultimately that the ITO cannot rely on the order of the AAC dated 17-9-1967 which merely followed the view taken by him in respect of the trust deed by the order dated 24-6-1959. Therefore, the reopening of the assessment was not in consequence of any information in the possession of the ITO and the reassessment proceedings were not valid. Though this decision at the first blush give an impression that it may apply to the facts of the case, on a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, thus, hearing both sides, we are inclined to agree with the arguments of the learned departmental representative and in pursuance thereof we hold that it is not simply enough that some information is available to justify reopening under section 147(b). In our considered view such information should lead to the formation of the belief that the income of the assessee had escaped assessment. Simply because the ITO in order to maintain judicial discipline had to carry out the orders of his superiors and implement them. Is orders of implementation cannot be said to be information leading to the formation of the belief that the income of the assessee had escaped assessment. Further in the Bombay High Court decision, while framing the assessment against the beneficiary for the assessment year 1958-59, the ITO took the view that the entire trust income was receivable by the trustees on behalf of the beneficiary and, therefore, the provisions of section 41(2) of the 1922 Act, applied to the entire income. Therefore, the question of information leading to the formation of the belief that the income of the assessee had escaped assessment is quite obvious in that case whereas it is not so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome principle of law should have been affirmed or reiterated. The above ratio does not apply, in our opinion, if the affirmation or reiteration is about a question of fact and not about principle of law. The decision as to which period should constitute previous year relevant to a particular assessment year is not a pure question of law. Utmost it can be said it is a mixed question of facts and law. Therefore, this ratio does not apply to this case. On the other hand, the following passage which occur in the same decision would support the contention of the revenue: "The fact that such knowledge or information could have been derived during the previous assessment from an investigation of the materials on record but was not in fact derived would not prevent such knowledge or instruction from being information in terms of section 147(b)." Now as far as the contention that section 150 does not apply to this case inasmuch as there was neither a finding nor a direction pertaining to the assessment year 1974-75 is concerned, we are of the opinion that it should be accepted. But, however, our acceptance of this submission does not lead us any where nor affect the ultimate result of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the assessment years 1972-73 and 1973-74 should be excluded, should be read as a finding or direction that the excluded income relatable to those previous assessment years should be included in the total income for the assessment year 1974-75. We are fortified in this regard by the categorical decision of the Andhra Pradesh High Court in B.A.R. Abdul Rahman Saheb's case where it is held as follows: "Thus, on a careful reading of Explanation 2 to sub-section (3) of section 153, it is evident that the mere exclusion of an income from an assessment year by a higher authority in a proceeding before it, gives jurisdiction to the ITO to assess or reassess that excluded income in different assessment year, and, in such a case, under Explanation 2 to section 153(3), it will be deemed to have been made in consequence of or to give effect to a finding or direction contained in the said older. If there is no finding or direction in the order of a higher authority, then Explanation 2 to section 153(3) of the Act will apply. On the other hand, if there is a finding or direction, the case would fall under section 153(3)(ii)." In our considered opinion, the Andhra Pradesh High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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