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TMI Blog1962 (9) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... l representative, his wife, Bai Shirinbai M.R. Dalal. On October 13, 1939, Dr. M.R. Dalal made a trust settling certain shares and securities on trust for the benefit of his son, F. M. Dalal, and two daughters, Miss Gool M. Dalal and Miss Ketty M. Dalal. Under the trust, it was directed that the income from the shares and securities settled on trust should be equally divided amongst his aforesaid three children. The trustees appointed under the trust were the settlor himself, his wife, Bai Shirinbai, and the Central Bank Executor and Trustee Company Ltd. By virtue of clause 13 of the trust deed, the trust was made irrevocable for a period of seven years. The said clause 13 is in the following terms: 13. It shall be lawful for the Settlor at any time during his life by any deed or deeds with or without power of revocation and new appointment or by will or codicil to revoke either wholly or partially the trusts and powers hereby declared concerning the Trust Funds hereby settled or any part thereof or the moneys or property for the time being representing the same and by the same or any other deed or deeds revocable or irrevocable or by a will or other testamentary document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year, i.e., assessment year 1952-53, the Central Bank Executor and Trustee Company Ltd., who was one of the executors of the trust, filed a return of the total income of the trust with the 3rd Income-tax Officer, A-IV Ward, Bombay. During the course of this assessment, the Income-tax Officer noticed that the period of seven years during which the trust was made irrevocable had expired, that the trust had become a revocable trust, and, therefore, the entire income from the trust property was assessable in the hands of Dr. Dalal. He accordingly informed the Income-tax Officer who had made the assessment in respect of Dr. Dalal's income. By this time, as already stated, the assessment in respect of Dr. Dalal's income was completed on January 27, 1954. The Income-tax Officer, therefore, on receiving the aforesaid communication, from the Income-tax Officer, A-IV Ward, Bombay, issued a notice under section 34(1)(b) and initiated reassessment proceedings. Before the Incometax Officer the applicant who had appeared in response to the notice under section 34(1)(b), inter alia, raised two contentions. The first contention was that the assessment could not be reopened under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived by him from the Income-tax Officer, A-IV Ward, Bombay, to the effect that the trust had then become revocable was a fresh information but that position is not borne out on the record. On the other hand, that information was always available to the Income-tax Officer, and the aforesaid communication made by the Income-tax Officer, A-IV Ward, Bombay, did not give any fresh information. The reopening of the assessment is therefore bad in law. He placed reliance on the three decisions in Purshottamdas Thakurdas v. Commissioner of Income-tax [1960] 39 I.T.R. 700, D.R. Dhanwate v. Commissioner of Income-tax [1961] 42 I.T.R. 253 and Raja Priyanand Prasad Singh v. Commissioner of Income-tax [1957] 32 I.T.R. 320. Mr. Joshi, on the other hand, contends that the Income-tax Officer who had reopened the assessment for the first time knew that the trust had become revocable only when he received a communication from the Incometax Officer, A-IV Ward, Bombay. The information was not available on the record. That trust deed was not on the record of the case of Dr. Dalal. That trust deed was filed on the record of the case by Miss Gool M. Dalal, and it was filed in the course of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s if the notice were a notice issued under that sub-section. Now the circumstances which empower an Income-tax Officer to take action under clauses (a) and (b) are different. Action under clause (a) could be taken in cases where there is either omission on the part of the assessee to make a return of his income, or failure on his part to disclose fully and truly all material facts necessary for his assessment even though he had filed a return of his income, and that that had resulted in either escapement of assessment or under-assessment. Clause (b), on the other hand, empowers the Income-tax Officer to take action in cases where the assessee had complied with the provisions of clause (a), but as a consequence of information coming into his possession, he had reason to believe that income, profits or gains chargeable to tax have either escaped assessment or under-assessed. Keeping in view these requirements of clauses (a) and (b), it would be relevant to turn to the finding of the Tribunal, in respect of the contention of the assessee that the income-tax authorities were in error in taking action under section 34(1)(b). The material part of the order which is a very short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the applicant that all the relevant facts, materials and documents were available on the record of the case of Dr. Dalal to the Income-tax Officer who made assessment in respect of Dr. Dalal's income on 27th January, 1954. The material and the relevant documents on the record show that the trust had become revocable after the expiry of seven years, i.e., after 23rd October, 1946, and therefore no fresh information had come into the possession of the Income-tax Officer by the communication received from the Income-tax Officer, A-IV Ward, Bombay. The copies of documents which are on record are included in the statement of the case as annexure E . Now E-1 letter dated 7th December, 1940, is written by the Income-tax Officer, who dealt with the case of Miss Goolbai M. Dalal for the assessment year 1940-41, to the Income-tax Officer who was dealing with the assessment case of Dr. Dalal of that year. The relevant part thereof is in the following terms: In the course of deciding the refund claim of Miss Goolbai M.R. Dalal, it has been proved that a deed of settlement dated 23rd October, 1939, has been made by Dr. M.R. Dalal which is irrevocable for 7 years in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the assessment of Dr. Dalal was received in the year 1940-41. Many years had elapsed. It would therefore not be reasonable to expect the Income-tax Officer, who dealt with the assessment of Dr. Dalal for the assessment year 1952-53 to carry in his mind all the information contained in the old record or to read the old record. We have no hesitation in accepting Mr. Joshi's argument that it would not be reasonable to expect the Income-tax Officer to carry in his head all that is contained in the old records. But it is difficult to accept his contention that it would not be reasonable to expect the Income-tax Officer referring to the old records which are relevant for the assessment with which he is dealing. Apart from it, it would not be unreasonable to expect that a note is taken of the relevant information which is useful for subsequent assessments of the assessee, and a note thereof is kept on record. Further the Income-tax Officer who has reopened the assessment under section 34(1)(b) is not the same officer who had made the assessment for the assessment year 1952-53 on January 27, 1954. The material question is whether that officer, i.e., who made the assessment on Januar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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