9911796707
TMI Blog1987 (9) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 69,810. Subsequently, the ITO reopened the assessment under section 147(a) by issue of notice under section 148 which was served on the assessee on 31-3-1978. The reasons recorded for reopening the assessment as per order sheet entry dated 30-3-1978 an extract of which has been furnished by the learned Departmental Representative reads as follows : "30-3-1978, The assessee received Rs. 5,00,000(Rupees Five Lacs) for M/s. Assam Forest Products Ltd. during 1974 C. Y. towards sale of standing trees. The original assessment u/s. 143(3) was completed on 29-9-1977 without including any income from sale of such trees either under the head 'Business' or under capital gains or other sources. Similar receipts in earlier years have been treated as income the orders made on 29-12-1977. The finding in assessment for assessment years 1972-73, 1973-74 and 1974-75, dated 29-12-1977 are informations within the working of section 147(b) that income for this year has not been assessed. The necessary particulars as to whether the trees were in fact removed or not, the quantity of trees felled and removed the area of land cleared, whether new plantation were made on such land or not were not furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; ------------ Rs. 4,90,000" ------------ The said addition was disputed in appeal before the CIT (A). The CIT (A) held that during the course of original assessment proceedings, the ITO had examined the taxability of the receipt shown of Rs. 5,00,000 in the profit and loss account for the year ending 31-12-1974 and that the ITO had enquire into the matter as he had asked the assessee to furnish information as directed in his letter dated 14-10-1976 in regard to the "total number of trees, quantity of timber sold and agreement with Assam Forest Products (P) Ltd. ". In the CIT (A)'s opinion, the notice issued under section 148 was itself invalid, "because it reflects change of opinion on the part of the second ITO" He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar the assessee's letter dated 20-09-1977 in response to the ITO's query raised in letter dated 14-10-1976 that the receipt of Rs. 5,00,000 was on the basis of an agreement dated 15-12-1973 entered into with M/s. Assam Forest Products (P) Ltd. In the said letter, reference was made to the ITO's order for the assessment year 1972-73, wherein he discussed the taxability of the receipts and his finding to the effect that, "the particulars agreement was entered into to exploit of its capital for the purpose of the business of the company" It was pointed out in the said letter that, the ITO's finding was that the receipt of Rs. 4,00,000 shown in the assessment year 1972-73 was capital in nature. It was pointed out that the copy of the agreement was furnished to the ITO along with the said letter dated 20-9-1977. Our attention was drawn to the Director's report as contained in the printed balance sheet and profit and loss account for the calendar year 31st December 1974, wherein it was mentioned, inter alia, that, "pursuant to the renewal of the agreement up to 31.12.1976 with M/s. Assam Forest Products (P.) Ltd. as reported last year the assessee has received during the year 1974 Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g quantitative details of the timber sold as also to furnish the copy of the agreement entered into by the assessee with M/s. Assam Forest Products (P) Ltd., vide his letter dated 14-10-1976. The assessee replied to the said letter [vide its letter dated 20-9-1977] stating that the amount received to the tune of Rs. 5,00,000 was a capital receipt and in this context reference was made to the "discussion and findings in the order of assessment for the assessment year 1972-73. " A copy of the agreement as called for by the ITO was enclosed with the assessee's letter. The ITO did not discuss in his order of assessment dated 29-7-1977 about the taxability or otherwise of the receipt shown in the profit and loss account of Rs. 5,00,000. In the reassessment order, the ITO considered the same materials that were available at the time of original assessment, namely, the agreement dated 15-12-1973 entered into by the assessee with M/s Assam Forest Products (P.) Ltd. as also the figures pertaining to the receipts or sale of standing trees from 1971 to 1979 calendar years, the area under tea cultivation during the said period as also the garden development expenses on account of re-plantation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of this section." There was a similar Explanation to section 34 of the Incomes-tax Act, 1922. The scope and intent of Explanation to section 34 has been explained by their Lordships of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 at page 201 which reads as follows : "It may be pointed out that the Explanation to the sub-section has nothing to do with 'inferences' and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose 'inferences' - to draw the proper inferences being the duty imposed on the Income-tax Officer." The issue also came up before the Supreme Court in the case of Madnani Engg. Works Ltd. wherein by following the decision in the case of CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609, it has held that the assessee was under no obligation to inform the ITO about the true nature of the transaction and there was accordingly no failur ..... 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