9911796707
TMI Blog1989 (10) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... revised on 10-2-78, showing income at Rs. 86,690. The reason for filing the revised return was explained in the forwarding letter attached with the second return mentioning therein that on account of clause (ii) of sub-section (1) of section 64 of the Act, the salary income of Rs. 21,600 and Director's fee amounting to Rs. 1000 received by the assessee from M/s. Murari Woollen Mills (P.) Ltd. had been excluded as was said to be assessable in the hands of the assessee's spouse as she and the assessee being relatives enjoyed voting powers more than 50% in the said concern at any time during the previous year in the financial affairs of the said company. The ld. ITO thus excluded an amount of Rs. 21,600 observing 'salary income to be assessed in the hands of assessee's spouse in terms of clause (ii) of sub-section (1) of section 64'. Similarly, another sum of Rs. 1,000 was also excluded again observing 'Director's fee assessable in the hands of the spouse under section 64(ii)'. Assessment originally was framed on 23-2-1978 under section 143(3) of the Act. 3. Subsequently, the ld. ITO framed assessment order on 22-3-82, for the assessment year 1979-80, in the case of assessee wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his wife as at the beginning the close of the accounting period is shown in the table below :-- Shareholding Shareholding of assessee Smt. Pushpa Soni As on 1-4-76 2,800 equity shares 475 equity shares of of Rs. 100 each Rs. 100 each valuing valuing Rs. 2,80,000 Rs. 47,500 As on 1-4-77 -do- -do- In view of the foregoing facts, the provisions of clause (ii) of sub-section (1) of section 64 are not attracted in relation to the remuneration in question and that the amount of Rs. 22,600 representing salary and Director's fee received by the assessee from M/s. Murari Woollen Mills (P) Ltd. will be assessable in his own hands notwithstanding the fact that such remuneration has been clubbed with the income of his wife." 5. The said assessment order was the subject matter of appeal before the ld. CIT(A) and Shri V.N. Nanda, the ld. authorised representative, argued on behalf of the assessee that on the facts and in the circumstances of the case, the ld. ITO had erred in law in initiating the reopening proceedings under section 147(b) of the Act. It was further pointed out that issuance of notice under section 148, for reopening of the assessment, was also illegal. It was further a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wned therein by his wife Smt. Pushpa Soni, an assessee in Distt. II(7), Ludhiana. The assessee is thus himself substantially interested in the company and the remuneration in the form of salary and Director's fee received from it is not due to the substantial interest of his wife in the company, as claimed by the assessee. Therefore, for the reasons discussed in my order for 1979-80, the remuneration (salary Director's fee) amounting to Rs. 22,600 should have been assessed as part of assessee's income which has not, however, been done. Thus, I have the reasons to believe that income of Rs. 22,600 chargeable to tax has escaped assessment for the asst. year 1977-78 within the meaning of section 147(b). Issue notice under section 148." 7. Thereafter, the ld. CIT(A), after perusing the order-sheet, the ld. ITO's finding, the assessment order for 1976-77 and the other material facts available in the record, cancelled the assessment order dated 17-3-1983 framed under section 147(b) of the Act with the following observations :-- "9. The perusal of the contents of the Order sheet as well as the finding given by the ITO in the body of the asst. order during the course of asst. proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) and some other cases which were seen to be off the point. 9. On behalf of the assessee, Shri R.K. Mehra, the ld. authorised representative, supported the finding under challenge and further placed reliance on various case laws, which will be mentioned and discussed in the subsequent paragraphs. According to Shri Mehra, there was no justification for invoking the provisions of section 147(b) of the Act as all material facts had initially been disclosed by the assessee and that the ld. ITO's action was on account of mere change of opinion. According to him, re-opening on mere change of opinion was not sanctioned by law. It was submitted by the ld. authorised representative that since an erroneous finding was correctly cancelled, there was no justification for interference. 10. Submissions made and contentions raised on behalf of the contesting parties have been heard and record carefully perused. In this case, the facts as earlier described, in brief, are that assessee initially reflected the income, including salary income of Rs. 21,600 and Director's fee amounting to Rs. 1,000 received from M/s. Murari Woollen Mills (P) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which inter alia contains the acquisition of 2320 shares by the assessee and 320 shares by his spouse, thus totalling 2640 shares held by the assessee and the spouse out of total number of shares amounting to 5100 of the said company. Thus, it has been emphasised that the assessee and the spouse were having more than 50% of the Voting Power in the said limited company and under these circumstances and in view of express, provisions of section 64(2), the income of the assessee has been deleted by way of filing the revised return and such income is to be included in the hands of the spouse of the assessee." As mentioned earlier that much of discussion is not there in the initial assessment order dated 23-2-1978 for the assessment year under consideration but all relevant facts are seen to have been discussed in the assessment order for 1976-77 of the same date. This gives clear indication that the assessee on his part, disclosed all material and relevant facts. The conclusion was to be arrived at by the ld. ITO from the material placed on record. Here, in fact, lies the catch. The ld. ITO on that material concluded that the two receipts were includible in the hands of the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome in possession of the ld. ITO and secondly it was not from any external source. The ld. ITO's stand, in view of this ratio, is baseless. According to the ratio in the case of Raja Jagdambika Pratap Narain Singh v. CIT [1980] 124 ITR 316 (All.), 'information' could not be of fact of which ITO was aware at the time of original assessment. This ratio laid down by the Hon'ble Allahabad High court directly hits the action of the ld. ITO as he was very well knowing the state of affairs existing in the assessee's case which had fully been disclosed at the time of initial assessment proceedings. This ratio is also against the revenue. In fact, in terms of ratio in the case of Sassoon Spg. Wvg. Co. Ltd. v. CIT [1982] 137 ITR 427 (Bom.), in the circumstances of the case before us, there was no 'information' but a mistake by the ld. ITO at the time of framing the original assessment and section 147(b) of the Act could not be an answer for such a situation. The situation was created by the revenue and the assessee therefore cannot be blamed. According to another judgment of the Hon'ble Bombay High Court in the case of CIT v. H. Holck Larsen [1972] 85 ITR 467, mere change of opinion would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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