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TMI Blog2000 (7) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the Income-tax Officer was justified in reopening the assessment on the basis of the information received from the Revenue audit party ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the information given by the Revenue audit party regarding the ratio laid down in the case of Sir Currimbhoy Ebrahim Baronetcy Trust v. CIT [1963] 48 ITR 507 (Bom) constituted 'information' within the meaning of section 147(b) of the Income-tax Act, 1961 ?" In Ref. Appln. No. 709/Ahd. of 1983 : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the action of the Income-tax Officer of assessing the applicant as 'owner' in respect of the income from house property in question was justified when the applicant as the executors were holding the property in question merely as trustees for and on behalf of the beneficiaries and, therefore, the property income was rightly assessed in the original assessment in the hands of Smt. Saraladevi Sarabhai, the beneficial owner ? (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wner. He was also impressed by the fact that the assessee had not produced any written option exercised by Smt. Saraladevi Sarabhai, and presumed that no such option was exercised. As regards the assessment year 1973-74, the Income-tax Officer had reopened the assessment under section 147(b) of the Act on the ground that income from the property can be taxed in the hands of the owner, as per the ratio laid down in the case of Sir Currimbhoy Ebrahim Baronetcy Trust v. CIT [1963] 48 ITR 507 (Bom) and that the liability to tax arises from the fact that the assessee was the owner of the property being the executors and trustees of the estate of the late Shri Ambalal Sarabhai. It was also noted that this mistake was pointed out by the Revenue audit party of the Auditor-General. On the basis of this information, according to the Income-tax Officer, he had reason to believe that the income of the assessee was underassessed. The return of the income for the assessment year 1973-74 was filed on August 14, 1973. By the assessment order dated November 22, 1975, the Income-tax Officer held that in Indian law beneficial ownership is unknown and that there is but one owner, namely, the legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the year 1972-73. The reopening of assessment for the assessment year 1972-73 was, therefore, held to be illegal. As regards the assessment year 1973-74, the Tribunal was of the view that in the reasons recorded by the Income-tax Officer for reopening the assessment, the decision in Sir Currimbhoy Ebrahim Baronetcy Trust's case [1963] 48 ITR 507 (Bom), was mentioned and the audit note which had pointed out the mistake of not considering the law laid down in that case was also referred to. The Tribunal therefore held that the information given by the Revenue audit party of the ratio in Sir Currimbhoy Ebrahim Baronetcy Trust's case [19631 48 ITR 507 (Bom), constituted information on the basis of which the Income-tax Officer was justified in reopening the assessment under section 147(b) for the assessment year 1973-74. The Tribunal, therefore, allowed the assessee's appeal for the year 1972-73 and dismissed that for the assessment year 1973-74, by its order dated August 18, 1981. In that order, the Tribunal had omitted to consider the question on the merits in the context of the provisions of section 22 of the said Act in respect of the assessment year 1973-74 for which it upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yanji Mavji and Co.'s case [1976] 102 ITR 287 (SC) was not in the context of section 9 of the Act of 1922 and the aspect of ownership of the property was not an issue in Kalyanji Mavji and Co.'s case [1976] 102 ITR 287 (SC). That was a, case which laid down the law as to what constituted "information". Therefore, the Tribunal was right in holding that the reasons did not disclose that the Income-tax Officer had reason to believe that income had escaped assessment, on the basis of any information, The Income-tax Officer referred to information from an outside source, which is not disclosed in the reasons recorded. We, therefore, hold that the Tribunal was right in law in coming to the conclusion that the reopening of the assessment for the assessment year 1972-73 under section 147(b) was not legal and question No. 1 for the assessment year 1972-73 is accordingly answered in favour of the assessee and against the Revenue. As regards the assessment year 1973-74, on going through the reasons it is clear to us that the Income-tax Officer did refer to the information which he obtained as regards the ratio of the decision of Sir Currimbhoy Ebrahim Baronetcy Trust's case [1963] 48 ITR 507 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he true and correct state of the law derived from relevant judicial decisions, that would constitute an information for the purpose of invoking the provisions of section 34(1)(b) of the Act of 1922. In our view therefore, the Tribunal was right in holding that the Income-tax Officer was justified in reopening the assessment for the assessment year 1973-74 on the basis of the information received from the Revenue audit party and on the basis of the ratio of the decision of the Bombay High Court in Sir Currimbhoy Ebrahim Baronetcy Trust's case [1963] 48 ITR 507. The above questions Nos. 1 and 2 referred at the instance of the assessee in this regard are, therefore, answered in the affirmative in favour of the Revenue and against the assessee. We now take up the question raised by the assessee contending that reassessment of the income from the house property in the hands of the assessee could not have been done in view of the beneficial ownership having vested under the will in Smt. Saraladevi Sarabhai, in whose hands, according to the assessee, the income from the house property was already assessed. The provision of section 22, which falls for our consideration reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he owner Must be that person who can exercise the rights of the owner not on behalf of the owner, but in his own right. The Supreme Court observed that like all other laws, even the tax laws are to be interpreted reasonably and in consonance with justice. In CIT v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625 (SC), while construing the provisions of section 22 of the said Act, and considering the effect of the decision in R. B. Jodha Mal Kuthiala's case [1971] 82 ITR 570 (SC), the Supreme Court held that the observations in R. B. Jodha Mal Kuthiala's case [1971] 82 ITR 570, clearly fixed the liability on the person who receives or is entitled to receive the income from the property in his own right. It was in terms held that in the context of section 22 of the said Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely---"to tax the income", a person who is entitled to receive income from the property in his own right is the owner contemplated by the said provision. This view was taken after noticing that the settled position under the common law as to the meaning of "owner" was that owner means a person who has got valid tit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, she was the beneficial owner thereof in whose hands the property was rightly assessed. The executor gets a representative title as provided in section 211 of the Indian Succession Act, 1925, and all the property of the deceased person vests in him as such legal representative, except any property which would otherwise have passed by survivorship to some other person. On the other hand, if a legacy is given in general terms without specifying the time when it is to be paid, the legatee has a vested interest in it from the day of the death of the testator as per section 104 of the Indian Succession Act. The assent of the executor which is necessary to complete a legatee's title to his legacy to a specific bequest will be sufficient to divest his interest as executor therein and to transfer the subject of the bequest of the legatee, unless the nature or the circumstances of the property require that it shall be transferred in a particular way, as provided by sections 332 and 333 of the Indian Succession Act. Such assent may be verbal and it may be either express or implied from the conduct of the executor. The assent of the executor to a legacy gives effect to it from the death ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to or applied to the benefit of the specific legatee, treats it as income in the hands of the specific legatee. This would mean that where the income from house property is so applied to the specific legatee, he is to be treated as the beneficial owner of the house property so far that income from the house property is concerned, for the purpose of section 22 of the Act. Therefore, on a combined effect of section 22 and section 168(4) of the said Act, the notional income from the house property, which was not let out, on the basis of its annual value would become taxable in view of the life interest of the nature mentioned in the codicil having devolved on the widow Smt. Saraladevi Sarabhai as a specific legatee, in her hands, the executors having assented to the title to her legacy which gave effect to the legacy from the death of the testator. The notional income from the house property on the basis of annual value stood applied to the benefit of the widow by the very nature of the legacy which entitled her to life long residence to the exclusion of all others and also to the exclusive right to the rents and profits from the said house property. The income from the house propert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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