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TMI Blog2002 (7) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... hnicalities. The delay in our view is not wilful nor is the delay inordinate. In the interest of justice the delay in filing the appeal deserves to be condoned and is accordingly condoned. 3. The assessee is a registered firm deriving income from trading in Tendu leaves. For the asst. yr. 1990-91, the assessment was completed under s. 143(3) of the Act on 18th Sept., 1992. The firm was dissolved on 31st March, 1990. One of the partners Shri Ramlal Agrawal took over the business and carried on the same in the same old name as proprietor. At the time of the original assessment proceedings, the AO had duly recorded the fact of the dissolution of the firm and taking over of the business by one of the partner. Subsequently, audit objection was raised to the effect that there was a transfer of goodwill of the firm to one of its partners on dissolution and thus, the capital gain arising out of the transfer of goodwill is liable to be taxed under s. 45(4) of the Act. Based on this audit objection, a notice under s. 147 was issued to the assessee. In response to which, the assessee filed the return of income showing the total income as determined in proceedings under s. 143(3) as modified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment can be reopened is on the belief of the AO that there has been escapement of income assessable to tax. The belief of the AO that there has been escapement of income has to be on new information and not a mere change of opinion on the same set of facts. In this connection he relied on the decision of the Honourable Supreme Court in the case of Associated Stone Industries (Kotah) Ltd. vs. CIT (1997) 138 CTR (SC) 260 : (1997) 224 ITR 560 (SC), the Honourable Delhi High Court in the case of Jindal Photo Films vs. Dy. CIT (1999) 154 CTR (Del) 355 : (1998) 234 ITR 170 (Del), the decision reported in CIT vs. Rajalakshmi Textile Processors Ltd. (1998) 146 CTR (Mad) 52 : (1999) 235 ITR 718 (Mad), 234 ITR 117 (sic), Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC), S. Harinivas Choudhary vs. Asst. CIT (2000) 246 ITR 256 (Mad) and Needle Industries (I) Ltd vs. CIT (1989) 76 CTR (Mad) 217 : (1990) 183 ITR 393 (Mad). 6. He also submitted that the entire basis of reopening was on the report of the audit party. His submission in this regard is that the audit party had interpreted the provisions of applicability of s. 45 (4) of the IT Act, 1961, to the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 153 referred to as the relevant assessment year): Provided that where an assessment under sub-s. (3) of s. 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under s. 139 or in response to a notice issued under sub-s. (1) of s. 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1: Production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2: For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely: (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pement of income as the non-consideration of an element of transfer of goodwill in the process of dissolution of firm and consequent takeover of it's business by one of it's partner as sole proprietor. The basis on which the AO entertained such a belief is the note of the audit party. Therefore, it cannot be said that there was no reason to believe on the part of the AO that the income liable to tax has escaped assessment. 12. We however find that the assessment in the present case relates to asst. yr. 1990-91. For reopening of the above assessment within a period of 4 years from the last day of the assessment year it is enough if the AO has 'reason to believe that income liable to tax has escaped assessment'. Admittedly in the present case the reopening of the assessment under s. 147 was sought to be made by issue of a notice under s. 148, dt. 11th Jan., 1999, which period is beyond 4 years from the end of the relevant assessment year. For reopening a completed assessment beyond this period of 4 years, however, the condition is that there should be failure to file return of income or to disclose fully and truly all material facts necessary for his assessment for that assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether on disclosure by the assessee or discovered by him on the basis of facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences and ascertain on the correct interpretation of the taxing enactment, the proper tax leviable." After referring to the aforesaid observations, the Honourable Supreme Court proceeded to hold that the finality of proceeding is certainly a consideration but that avails one who has fully and truly disclose all material facts necessary for his assessment for that year and not to others. 14. From the perusal of aforesaid observations of the Hon'ble Supreme Court, it is clear that the assessee is required to place before the AO all the primary facts necessary for his assessment and once that is done the assessee can be said to have discharged his obligation in this regard In the present case, as already mentioned, the assessee had disclosed the factum of dissolution of the firm. Even in the reassessment proceedings the claim of the Revenue is that there is deemed transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under s. 254 only to decide the grounds which arise from the order of CIT(A). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. Tribunal should not be prevented from considering questions of law arising in assessment proceedings although not raised earlier. The following decisions were applied and others overruled: Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC) applied; CIT vs. Anand Prasad (1981) 128 ITR 388 (Del), CIT vs. Karamchand Premchand (P) Ltd. (1969) 74 ITR 254 (Guj) and CIT vs. Cellulose Products of India Ltd. (1985) 44 CTR (Guj)(FB) 278 : (1985) 151 ITR 499 (Guj)(FB) overruled. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings such a question should be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 16. Thus 2nd ground of appeal of the assessee is allowed. 17. The 3rd ground of appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandard. Goodwill is found on the belief and faith of the customer. Where a business involves no distinguishable features and deals in standard articles manufactured by someone else which one can get from everywhere, not merely from a particular dealer, there is hardly possibility of there being a goodwill attached to such business". It was further submitted by the learned counsel for the assessee that Tendu leaves being a natural forest product and it's quality being the prime consideration for saleability in the market which factor was beyond the control of the assessee, it cannot be said that the assessee possessed any goodwill which it was capable of transferring to the sole proprietor. He submitted that there is no brand name in this line of business. As a matter of fact it was submitted that the sole proprietor suffered losses for asst. yrs. 1991-92, 1992-93 and the loss was determined in assessment proceedings under s. 143(3). It was also submitted that the assessee has now changed his line of business into that of rice. 20. The learned Departmental Representative on the other hand submitted that the firm derived profits from it's business and the fact that the said busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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