9911796707
TMI Blog1976 (9) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... uity. Being aggrieved by the said order of the respondent No. 1, the petitioner preferred an appeal before the AAC. He disposed of the appeal by his order dated August 5, 1975, granting some relief to the petitioner. Thereafter, the impugned notice under s. 148 of the Act was served upon the petitioner by the respondent No. 1. It has been alleged in the said notice that the respondent No. 1 has reason to believe that the income chargeable to tax for the assessment year 1972-73 has escaped assessment within the meaning of s. 147 of the Act, and that he proposed to reassess the income that has so escaped assessment. By the said notice, the respondent No. 1 directed the petitioner to file a return in the prescribed form within thirty days of the date of service of the same upon the petitioner. The petitioner submitted a return under protest along with a letter dated November 29, 1975. In the said letter, it has been stated by the petitioner that the reopening of the assessment is unwarranted and uncalled for, that there was a full and true disclosure of all materials and relevant facts necessary for the said assessment year, and that there has been no escapement of income at all. By t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of income of the assessee. It is only after the petitioner challenged the existence of any reason for the belief that the respondent No. 1 by his letter dated December 16, 1975, stated that the Supreme Court case of Bombay Dyeing and Manufacturing Co. Ltd. [1974] 93 ITR 603 was an information to him for the issue of the notice. I shall refer to the said Supreme Court decision presently for the purpose of considering as to whether that decision supplied any information to the respondent No. 1 for reopening the assessment. But assuming for the time being that the said Supreme Court decision furnishes information justifying the reopening of the assessment, there is no evidence that on the basis of that decision, the respondent No. 1 issued the impugned notice. It is apparent that the respondent No. 1 wants to reopen the assessment in regard to the actuarial value of the gratuity deducted by the petitioner in computing its income which was also accepted by the respondent No. 1. In Standard Mills Co. Ltd. v. Commissioner of Wealth-tax [1967] 63 ITR 470, the Supreme Court held that the liability to pay gratuity to the employees on determination of employment is a mere contingent lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awards for the benefit of its employees in respect of their periods of service up to the valuation date was deductible. The Supreme Court relied on its earlier decision in the case of Standard Mills Co. Ltd. [1967] 63 ITR 470 (SC) and held that the estimated liability of the company in respect of gratuity was not deductible. It was observed by the Supreme Court as follows : " The High Court following the decision of this court in Standard Mills Co. Ltd. v. Commissioner of Wealth-tax [1967] 63 ITR 470 (SC) answered that question in favour of the department. It is not disputed that the said decision governs the facts of this case, but we are asked to have that decision re-considered by a larger Bench in view of the decision of this court in Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53 (SC). Metal Box Company's case [1969] 73 ITR 53 (SC) was a decision rendered under the Bonus Act. In that decision, the learned judges referred to the decision of Standard Mills Co. Ltd. [1967] 63 ITR 470 (SC) and distinguished the same. In our opinion, there is no conflict between the two decisions. " It is the case of the respondent No. 1 that the decision of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to a matter bearing on the assessment. (2) Such knowledge or instruction must come into the possession of the ITO after the previous assessment. (3) The knowledge or information must be such which leads to the formation of the belief that the income of the assessee had escaped assess. ment or had been under-assessed. (4) The proximate or immediate source of such information and knowledge must be external. (5) The fact that such knowledge or information could have been derived during the previous assessment from an investigation of the materials on record but was not in fact derived would not prevent such knowledge or instruction from being information in terms of s. 147(b). In my opinion, the respondent No. 1 did not acquire any knowledge from the judgment in the case of Bombay Dyeing and Manufacturing Co. Ltd. [1974] 93 ITR 603 (SC) leading to the information or the belief that the income of the petitioner had escaped assessment. The principle laid down by the Supreme Court in the case of Metal Box Company [1969] 73 ITR 53 that gratuity liability is a contingent liability was within the knowledge of the respondent No. 1. That principle was affirmed by the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am unable to accept this contention. It is true that sufficiency of the ground cannot be questioned but if there be no existence of the ground or if the ground is not at all reasonable or is absurd on the face of it, the court is competent to strike down the notice issued on the basis of such a ground. The respondent No. 1 was all along aware of the fact that the gratuity liability is a contingent liability and, on that basis, the deduction claimed by the petitioner on the estimated value of the liability computed on actuarial basis was allowed for the assessment year in question. If in any subsequent decision, it is once more held that such a liability is a contingent liability as it was held in the case of Bombay Dyeing and Manufacturing Co. Ltd. [1974] 93 ITR 603 (SC), in my opinion, it did not furnish any information to the respondent No. 1 who cannot be said to have acquired any knowledge justifying the formation of a belief that the income of the petitioner had escaped assessment. There was, therefore, no existence of any ground for the belief. Moreover, as pointed out above, no evidence has been placed before this court to show that at the time of the issue of the notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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