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TMI Blog1986 (3) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... e have heard the representatives of the parties at length in this appeal and to our mind the point is not free from difficulty. Assessee's representative produced a copy of the original assessment order dt. 6th Oct., 1981. He also produced the details of some of the papers purporting to have been filed by him in the course of the original assessment, namely, payments on account of salary and interest etc. From a perusal thereof, it would appear that if the ITO had looked into the same, he certainly could have found that the assessee had made a claim for interest and salary brought forward from the previous year. The assessee's contention in this behalf was that it had obtained loan from Punjab & Sindh Bank for purchase of an old ship at Calcutta in December, 1977. The ship was dismantled and its components and accessories were sold as scrap. This was a case of simple adventure which had spread over a period of 15 months only and therefore, the total accounts relating to this adventure were given to the ITO in this year only. In this behalf the relevant part of the order of the ITO are as under: ".....At Calcutta, the assessee had purchased an old ship from Himalaya Shipping Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the M.P. High Court in Yeswant Talkies vs. CIT (1985) 47 CTR (MP) 57 : (1986)157 ITR 103 (MP). In this case the ITO had received certain audit objections in relation to wrong allowance in respect of gratuity, bonus etc. Consequent to the receipt thereof, the ITO initiated proceedings under s. 147 (b) and made some additions. The assessee went in appeal to the CIT (A) who accepted the contention of the assessee and annulled the assessment. On a second appeal. the Tribunal came to the conclusion that initiation of re-assessment proceedings was valid but the matter was sent back to the commissioner for consideration of the assessee's appeal on merits. The assessee took up the matter in reference. The order sheet entry in the file stated "As directed by the CIT, I am satisfied that income has escaped assessment." The High Court held that since on the materials collected by the ITO was already there on the record and no fresh material had come into his possession except direction of the CIT, the ITO could not record his satisfaction to initiate proceedings under s. 147(b). 4. On behalf of the Department reliance was placed on the decision of the Kerala High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of re-opening the assessment of an earlier year. 5. We have already pointed the dividing line in this case is also rather thin. However, although the matter is not absolutely free from difficulty, we are of the opinion that it would be probably better to take a view in favour of the assessee in the present case. To the mind of the dictating Member this was probably one of those such rare cases where the principle laid down by the Supreme Court in CIT vs. Vegetable Products 1973 CTR (SC) 177 : (1973) 88 ITR 912 (SC) could be said to apply. Though now the Patna High Court has given a go by to this principle, the same can probably be held to the still applicable to the present case. The reason for taking this view is that (1979) 116 ITR 158 (Ker) which goes to support the view of the Department was decided, when the decision of the subsequent Supreme Court Decision in Indian and Eastern Newspaper Society vs. CIT (1979) 12 CTR (SC) 190 : (1979) 119 ITR 996 (SC) was not available to the Hon'ble High Court and the cases holding the field were the decision of the Supreme Court in the case of ITO vs. Kasturbhai Lalbhai 1977 CTR (SC) 336 : (1977)109 ITR 537 (SC) and Kalyanji Mavji & co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of this old ship at Calcutta was a single transaction, in respect of which accounts were submitted in this very year which was permissible in view of the Bombay High Court decision in (1957) 31 ITR 92, (Bom) this is probably wholly incorrect. Assessee had a continued course of business in selling iron and steel. The IAC in his directions has referred to the letter head pads wherein the business of the assessee had been shown to be ship breakers as well. The decision of the Bombay High Court relied upon by the assessee in this behalf in Gustad Dinshaw Irani vs. CIT (1957) 31 ITR 92 (Bom) would be probably not applicable. Moreover, a perusal of the original assessment order clearly shows that the assessee claimed interest on an accrual basis in a revised return and the ITO in the first instance after thoroughly applying his mind adjudicated that claim by limiting it to Rs. 80,000 and not Rs. 96,420 as claimed by the assessee. This fact wholly goes against the assessee's contention on merits but incidentally supports the assessee on the question that the ITO making the assessment earlier had duly considered the issue that the assessee's system of accounting is mercantile. 7. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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