TMI Blog1958 (10) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, both of 1956-57, relating to the assessment years 1953-54 and 1954-55 respectively, In all these three appeals a common contention raised before the Tribunal was in regard to the validity of initiation of action under section 34. The Tribunal by its main order passed in I.T.A. No. 6112 of 1956-57 accepted this contention for each of these three years though for different reasons. The Commissioner of Income-tax, Bombay City II, also requires the Tribunal by two separate applications to refer to the High Court a question said to be of law arising out of the Tribunal's orders in I.T.A. Nos. 6113 and 6114. These applications are being dismissed by a separate order as we have come to the conclusion that no question of law arises out of the said two orders. But as the facts for all these three years are identical, it is convenient to set them out here. 3. In December, 1940, Bai Navajbai, the assessee, made an oral trust in respect of securities of the face value of ₹ 5 lakhs. The object of the trust was to pay the income arising from the trust properties to a Parsee Hunersala. The deed of trust was made on August 25, 1943. Clause 10 of the trust deed expressly empowered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund claim was pending before another Income-tax Officer, known as Income-tax Officer, Bombay Refund Circle. Now section 4(3)(i) was amended by section 3 of the Indian Income-tax (Amendment) Act, 1953, and the material portion of the amended section is as follows : Any income......falling within the following classes shall not be included in the total income of the person receiving them : (i) Subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust......wholly for religious or charitable purposes,....... The said amendment Act received the assent of the President on May 24, 1953, and the above amendment was made in section 4(3)(i) with retrospective effect from April 1, 1952. On October 15, 1954, the assessee exercised the powers reserved vby her under section 10 of the trust settlement made on August 25, 1943, and declared certain other trusts. Further, the trust settlement was also made irrevocable. 5. Having regard to the said amendment to section 4(3)(i), the Income- tax Officer, Bombay Refund Circle, before whom refund applications made by the trustees for the assessment years 1952-53 and 1953- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of India United Mills Ltd.** For the reasons given by the Tribunal in paragraph 5 of its order (annexure 'A') it rejected the Department's contention and accepted the assessee's. 7. On these facts, the Commissioner requires the Tribunal to refer to the High Court the following question of law: Whether in the circumstances of the case, the Income-tax Officer was entitled on receipt of information to the effect that section 4(3)(i) of the Indian Income-tax Act had been amended by an Act which received assent on May 24, 1953, but which was expressed to have retrospective effect, to issue a notice under section 34(1)(b) so as to re-open the assessment for 1952-53 made on August 29, 1952. G. N. Joshi, for the Commissioner. R. J. Kolah, for the assessee. JUDGMENT The judgment of the court was delivered by K.T. DESAI, J.-- This is a reference under section 66(1) of the Indian Income-tax Act, 1922. The assessee in this case is Bai Navajbai N. Gamadia. The assessment year is 1952-53, the previous year being the financial year 1951-52. A re-assessment was made by initiating assessment proceedings under section 34 of the Indian Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (c) of sub-section (1) of section 16, any income derived from property held under trust..... wholly for religious or charitable purposes,.... The effect of this amendment was to render the income derived from the properties upon the aforesaid trust liable to be included in the income of the assessee. Now, this amendment was given retrospective effect from 1st April, 1952, with the result that if the law as altered by this amendment had to be given effect to from 1st April, 1952, the income from the properties settled upon trust as aforesaid was liable to be included in the income of the assessee. As regards assessment years 1953-54 and 1954-55, the assessments were completed on 25th November, 1953, and 15th July, 1954, respectively long after the date of the coming into force of the Indian Income-tax (Amendment) Act, 1953. In spite of the fact that the amendment had come into force, the Income- tax Officer failed to give effect to the provisions of the Act as amended for assessment years 1953-54 and 1954-55 an did not include the income from the properties settled upon trust in the income of the assessee for those assessment years. This was discovered very much later afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 4(3)(i) of the Indian Income-tax Act had been amended by an Act which received assent on May 24, 1953, but which was expressed to have retrospective effect, to issue a notice under section 34(1)(b) so as to re- open the assessment for 1952-53 made on 29th August, 1952? This reference has been made at the instance of the Commissioner. Mr. Kolah strongly urged before us that we should not decide this question at the present stage. According to his submission, the facts necessary for determining this question cannot be found in the statement of the case and that having regard to the well settled law on the subject, we should refer the case back to the Tribunal for determining other questions of facts and making a further statement of facts to enable us to decide the question. Mr. Kolah's contention was that the only ground on which the Department sought to reopen the assessment in connection with the assessment year 1952-53 was ignorance about facts similar to the ignorance about facts pleaded in respect of assessment years 1953-54 and 1954-55. According to him, there was in fact no such ignorance and that there being no other ground pleaded for re-opening the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ospective effect from 1st April, 1952. The information about the promulgation of the amendment is information within the meaning of section 34(1)(b) of the Income-tax Act as observed by the Supreme Court in Chatturam Horilram v. Commissioner of Income-tax [1955] 27 I.T.R. 709. That information could only come into the possession of the Income-tax Officer on or after the promulgation of the amending Act i.e., on or after 24th May, 1953. That information must be necessity be subsequent to 29th August, 1952, the date when the assessment was made. In consequence of such information in this possession the Income-tax Officer had reason to believe that income chargeable to income-tax had escaped assessment for the assessment year 1952-53. The facts necessary for the purpose of deciding the question before us are those which we can find from the statement of the case itself. The only fact necessary for the purpose of answering the question is whether the Income-tax Officer received information to the effect that section 4(3)(i) of the Indian Income-tax Act had been amended by an Act which received assent on 24th May, 1953, but which was expressed to have retrospective effect from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument does not really help the respondent's case because the order passed by the Income-tax Officer under section 18A(5) cannot be said to be final in the literal sense of the word. This order was and continued to be liable to be modified under section 35 of the Act. What the Income-tax Officer has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by section 13 of the Amendment act alone, but to exercise his power under section 35 of the Act; and so the question which falls to be considered in the present appeal centres round the construction of the expression 'mistakes apparent from the record' used in section 35. That is why we think the principle of the finality of the orders of the sanctity of the existing right cannot be effectively invoked by the respondent in the present case. We can equally use these remarks in connection with the exercise of the powers under section 34 of the Act and we can equally say that the order of assessment passed cannot be said to be final in the literal sense of the word. The order was and continued to be liable to be modified under section 34 of the Act. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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