9911796707
TMI Blog1980 (4) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the said income, which deductions were disallowed and added back by the ITO for reasons given in his original assessment order dated May 25, 1958. Since the income from the said building was treated and assessed to tax as business income under s. 10 of the Act, the ITO also allowed depreciation on the cost of the building. Thereafter, by his notice dated May 2, 1962, issued under s. 23(2) of the Act, the ITO required the assessee to state its objections for the computation of income from the said building under s. 9 instead of s. 10 of the Act as was done in the original assessment. By its reply dated May 17, 1962, the assessee claimed computation of the said income under s. 10 of the Act. However, without prejudice to its said contention, the assessee sent its memo dated July 26, 1962, for computation of income under s. 9 of the Act. Thereafter, the ITO by his notice dated Match 25, 1962, issued under s. 34(1)(b) of the Act, reopened the original assessment by giving the following reasons : " Reassessment proceedings in this case were started to assess the property income from Recluse building partly let out u/s. 9. At the time of original assessment, this was not offere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate that the said building was owned by the assessee and that the rent was received from the tenants Occupying the same during the previous year. He further observed that " it was conceivable for persons to think that the rent in question was in respect of sub-letting portion of the leased premises or that it related to an earlier accounting period ". According to him further, the information furnished by the assessee under its letter dated February 25, 1958, in respect of the details for repairs of the building was incomplete, if not misleading. From the details given, it was reasonable to infer that the entire building was occupied by the mining department of the assessee throughout the previous years, and hence it could not be said that all the relevant facts were available to the ITO at the time of the original assessment to come to correct finding with regard to the income from the rent received from the said building. He further opined that it was, long after the completion of the original assessment that enquiries were instituted by the ITO and the assessee gave full details in such enquiry under its letter dated May 17, 1962. He also held that the ITO came to know that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly cancelled the reopening by its order dated August 20, 1966. The revenue's application for reference under s. 66(1) of the Act was rejected by the Tribunal for the same reasons holding that no question of law requiring the opinion of this court arose in the circumstances. However, thereafter, as stated earlier, the case has been stated by the Tribunal at the direction of this court under s. 66(2) of the Act and the question that has been referred is as follows: " Whether, on the facts and in the circumstances of the case, the action initiated by the Income-tax Officer under section 34(1)(b) was competent ?" We may at the outset quote the provisions of s. 34(1)(b) of the Act, which are as follows : "34. Income escaping assessment.-(1) If ....... (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of opinion based on information subsequently obtained, on the other. In the former class of cases, the assessment proceedings are attempted to be reopened without the discovery of an error and without receiving any information as to fact or law. The Income-tax Officer has fresh look at the earlier assessment order and he decides to adopt different approach to the matter. Such a reopening is based on a 'mere' change of opinion and is without jurisdiction. The Income-tax Officer cannot reopen an assessment at his 'sweet will and pleasure'. In the latter class of cases, the reopening is based on information leading to the requisite belief and is therefore within the jurisdiction of the officer. It is then not for the High Court to determine whether the assessment should be reopened, for it is for the Income-tax Officer to administer the Act." Thus, the law on the point as summarised in the aforesaid decision lays down that it is permissible for the ITO to gather information from his own record. However, the investigation which he carries on or the inquiries which he makes or the research that he undertakes must yield information on the basis of which alone he can initiate reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts or materials or without any enquiry into the materials which form part of the original assessment, section 34(1)(b) would have no application." In its later decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996, the Supreme Court did not accept the aforesaid wide proposition of law as laying down the correct law on the point and has in terms held that the aforesaid proposition to the effect (headnote), " that a case where income had escaped assessment due to 'oversight, inadvertence or mistake' of the ITO must fall within s. 34(1)(b) of the Indian I.T. Act, 1922, is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. An error discovered on a reconsideration of the same material (and no more) does not give him that power ". It may be mentioned in this connection that the direct question which fell for consideration before the Supreme Court in this decision was whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as already been incurred in the preceding year on repairs. Therefore, there can be no scope for further heavy expense on repairs. It is noticed that the company has been effecting alterations in a part of the building for improving its utility for its mining department. Such an expenditure is estimated at Rs. 12,000 and is disallowed because it is not covered by section 10(2)(v). 12,000" Furthermore, before completion of the original assessment, the ITO by his letter dated February 11, 1958, had called upon the assessee to furnish details in respect of all items of repairs to the building shown in its balance-sheet, and the assessee by its letter dated February 25, 1958, had furnished the said details in which an amount of Rs. 26,242-2-0 was shown as spent on repairs to the company's " Recluse " building occupied by its mining department. It is on the basis of these facts that the ITO had made the assessment of the said income under s. 10 of the Act. There is nothing on record to show as to what further " information " came into his possession subsequently, after the said original assessment order was made. On the other hand it appears, that the ITO in order to show that he had m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from an internal source or material which was already on record or otherwise, it was the internal change of opinion on the part of the ITO, on the same facts and material which prompted him to order the reassessment. This is, therefore, a case which is clearly outside the purview of the provisions of s. 34(1)(b). On the facts and circumstances of the case, there is not even a pretence that any information had come to light for the ITO which necessitated a resort to the reassessment proceedings. Shri Joshi, the learned counsel for the revenue, however tried to urge that this was a case where the ITO had not originally applied his mind to the relevant entry, and it was only after the subsequent application of mind and co-relation of the relevant material that he " obtained information " which showed him that certain income had escaped assessment at the time of the original assessment. We are far from satisfied that this is the case in the present proceedings. As has been already pointed out, the ITO has not even stated that any subsequent material had come to light or even that originally he had not applied his mind. As has been pointed out earlier, his only case is that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
