1976 (4) TMI 112 - AT - Income Tax

Summary

Issues:
1. Validity of reopening assessments under s. 147 (b)
2. Validity of trust created by the assessee in favor of his prospective daughter-in-law

Analysis:

Issue 1: Validity of reopening assessments under s. 147 (b)
The contention arises regarding the validity of reopening assessments under s. 147 (b). The Income-tax Officer reopened the assessments based on subsequent information received after the original assessments were completed. The Income-tax Officer did not consider the validity of the trust during the original assessment, as the trust deed was not produced at that time. The Supreme Court's guidance on s.34(1)(b) of the Income-tax Act, 1922, corresponding to s.147(b) of the Income-tax Act, 1961, is cited to justify the reopening of assessments due to oversight or inadvertence. The subsequent information received by the Income-tax Officer led to the belief of escapement of assessment, justifying the reopening. The Tribunal held that the reopening of assessments under s.147(b) was valid and cannot be challenged.

Issue 2: Validity of trust created by the assessee in favor of his prospective daughter-in-law
The trust created by the assessee for the benefit of his prospective daughter-in-law is scrutinized for validity. The Revenue argues that the trust is invalid due to the uncertainty of the beneficiary, as events like the minor son attaining majority and marrying are unpredictable. However, to constitute a valid trust, the intention to create a trust, purpose, beneficiary, trust property, and transfer must be clear. The trust aimed to provide for the prospective wife of the minor son, which does not render the beneficiary indeterminate. The law allows trusts for unborn persons within the rule against perpetuities. The trust deed outlined conditions for property distribution, ensuring the property vests within the lifetime of existing persons. As the trust did not violate the rule against perpetuities, it was deemed valid and proper by the Tribunal. Consequently, the appeals were dismissed in favor of the assessee.

This detailed analysis of the judgment highlights the key legal aspects and reasoning behind the Tribunal's decision on the issues raised in the case.