9911796707
TMI Blog1962 (7) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ly carries on a money-lending business. In the course of that business it advanced a sum of ₹ 2,58,000 during the years 1919-1926 to Sri Nizar Ahmed Khan, a Taluqdar. In due course a suit had to be filed for realisation of the debt and it was fought up to the Privy Council. Ultimately a decree was passed in favour of the assessee. Thereafter the debtor made an application under the U.P. Encumbered Estates Act and in due course a decree was passed by the special judge under section 14 of that Act and finally a sum of ₹ 5,00,992 was received by the assessee in full satisfaction. The receipt of the amount was partly in cash, viz., ₹ 1,54,692, and partly in the form of Encumbered Estate Bonds of the face value of ₹ 3,46,300. The cash was appropriated towards the principal amount in the year 1946 and we are no longer concerned with it. The cash was not sufficient to wipe out the principal and, therefore, the amount of the bonds included part of the principal, the entire interest and costs of the litigation. The bonds were received by the assessee on February 26, 1948 which date fell within the accounting period relevant to the assessment year in question. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered that the date of the receipt of interest was February 26, 1948, when the bonds were received by the assessee and not the date when by sale they were converted into cash in the succeeding accounting period. Accordingly, he took the view that interest income in the loan account of Sri Nizar Ahmed Khan had escaped assessment in the assessment year in question. Thereupon, after taking the sanction of the Commissioner of Income-tax, he issued a notice dated January 29, 1953, to the assessee under section 34. In the course of proceedings initiated by this notice he made a careful and detailed scrutiny of the interest accrued account of the assessee which his predecessor could not do on account of deaths in the assessee's family but about which he had left a note on the file. The result of the scrutiny was entirely unfavourable to the assessee and during the course of the scrutiny it was admitted by the assessee that the amount of ₹ 1,24,202-6-1 shown by it in the interest accrued account was not correct and the amount included in the decree on account of interest was ₹ 1,59,687-13-8. Thus on the admission of the assessee himself the entry in regard to inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated January 25, 1954, and included in this assessment a sum of ₹ 2,02,168 and not merely the sum of ₹ 1,24,202-6-1 as the interest income of the assessee for the assessment year 1948-49 in the loan account of Sri Nizar Ahmed Khan. The Income-tax Officer was also not satisfied that the amount claimed by the assessee as litigation expenses was the correct amount and allowed a deduction of ₹ 50,000 only by estimate. The Income-tax Officer also observed that action under section 28(1)(c) was being taken against the assessee separately. The Income-tax Officer relying on the decision of this court in Commissioner of Income-tax v. Maheshwari Saran Singh [1953] 19 ITR 83 overruled the contention of the assessee that the interest income was received not when the bonds were received but only when the bonds were subsequently converted into cash. Against the order of the Income-tax Officer the assessee went up in appeal before the Appellate Assistant Commissioner. It was argued by the assessee before that officer that the Income-tax Officer who made the original assessment must be taken to have recorded a judicial finding on the basis of facts which were all before him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared from the note left by the Income-tax Officer that he could not himself complete the scrutiny of the accrued interest account but that he desired that this should be done before the question of the taxability of interest income could be finally decided. From this reference by the Tribunal to the note of the Income-tax Officer it appears that the view of the Tribunal was that all necessary facts for the taxability of interest in come in the year in question were not known to the Income-tax Officer who made the original assessment and, therefore, no final opinion could have been expressed on the question by that officer until further and detailed scrutiny was made. As such that officer could not be held to have formed or expressed any opinion about the taxability of the amount and when his successor brought the amount to tax under section 34 he could not be said to have merely taken a different view from the view taken by his predecessor. According to the Tribunal the predecessor had not taken any view at all and as such there could be no question of any change of opinion by the successor. The Tribunal concluded by observing that the information in consequence of which the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be no actual receipt in money at all. It may only be a constructive receipt. It may also be a receipt in kind. It may be a receipt by adjustment or settlement of accounts. It would nevertheless be a cash basis of accounting. In our case the bonds were transferable and represented moneys worth. They were accepted by the assessee in settlement of the debt. After receiving them the assessee did not keep the loan account still outstanding but squared it up in its account books. In the circumstances the interest included in the bonds was properly the receipt of interest income of the assessee on the date on which the assessee received the bonds. The third question referred to this court must, therefore, be answered in the affirmative and against the assessee. In view of this answer the second question must also be answered in the affirmative and against the assessee. The bonds having been received on February 26, 1948, amounted to receipt of cash in the previous year 1947-46 and not during the next previous year 1948-49 when the bonds were sold and actually converted into cash. The fact that the bonds were sold in the succeeding previous year at less than their face value does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd would be irrelevant and misleading in a receipt or cash basis of accounting. On these facts it seems to be clear that the assessment under section 34 would be covered by sub-section (a) of section 34(1). That was the view of the Appellate Assistant Commissioner and the Tribunal also justified it under that sub-section even though it went on to consider its justifiability under sub-section (b) of section 34(1) also. The Tribunal recorded the finding of fact that there was omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment in the year in question. On the facts stated above it is not possible to say that there was no material in support of this finding of fact. It follows that the order under section 34 made by the successor Income-tax Officer was valid and the first question must also be answered in the affirmative and against the assessee. In this view it is not necessary to consider whether the assessment under section 34 can be justified under sub-section (b) of that sub-section (1), also. As, however, the point has been argued it may be dealt with. It, might be conceded that the orders of the authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective of the fact whether they are assessable or not. There is no evidence that the assessee included this amount in that part of the return. Thus, even though the Income-tax Officer may have glanced at the entry and signed it mechanically, in the view of the Tribunal it did not amount to the Income-tax Officer bringing to bear upon that entry a conscious mind for consideration of the question whether the amount was taxable or not. The Tribunal, therefore, held and it appears in the circumstances that it rightly held that it could not be said that the Income-tax Officer made any finding that the amount was not taxable. It, therefore, negatived the argument of the assessee that when the successor Income-tax Officer brought the interest income to tax under section 34 what he did was by a mere change of opinion. For a change of opinion the forming of an opinion prior to its change is a necessary postulate. On the findings of the Tribunal there was no previous opinion on the question formed at all. It follows that there could be no change of any opinion. One further fact may now be stated. The original assessment was made on March 21, 1951. The ruling in Commissioner of Income-tax v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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