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TMI Blog1981 (9) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... late Assistant Commissioner's order dated March 21, 1973, for taxing the income under the head 'Capital gains' ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Officer's action in initiating proceedings under section 147(b) for taxing the amount of compensation under the head 'Capital gains' amounted to an attempt to destroy the finality of the assessment?" The facts briefly stated are that in the accounting period relevant to the assessment year 1970-71, the assessee received Rs. 41,300 as compensation under the Motor Vehicles Act, 1939, consequent upon the nationalisation of certain routes. The ITO, in the assessment proceedings for the year 1970-71, held the said amount to be the business income of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lakhmani Mewal Das [1976] 103 ITR 437, 448 (SC)]. Section 147(b) authorises the ITO to start reassessment proceedings if he had, " in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment for any assessment year" . This section has been construed in a number of cases by the Supreme Court. The word " information ", as occurring here, means not only facts or factual material but includes also information as to the true and correct state of law and, therefore, information as to the relevant judicial decisions. The word has been defined to connote " instruction or knowledge derived from an external source concerning facts or particulars, or as to law, relating to a matter bearing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsation from the total income and, therefore, it was impliedly held that the amount could not be taxed even as capital gains and that the said order could not, therefore, constitute information under s. 147(b). We have carefully read the entire order of the AAC. There is absolutely no discussion in that order on the point whether the amount of compensation could be taxed as capital gains, as this point was not at all noticed or argued. The entire discussion is on the point whether it constituted business income and could be taxed as such. It is true that the AAC, after holding that the amount of compensation constituted capital receipt, directed that it be deleted from the total income. But this direction was given entirely on the footing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder constituted information for taking action to reassess the said amounts as capital gains. In holding so, the learned judges observed as follows (p. 150, col. 2); " Argument has then been advanced on behalf of the appellant-company that according to the observations of the Supreme Court in the case of Maharaj Kumar Kamal Singh [1959] 35 ITR 1 ; AIR 1959 SC 257, the information on the basis of which the Income-tax Officer initiates action under section 34(1)(b), must be subsequent to the original assessment order. It is urged that the information, which led the Income-tax Officer to initiate action, was already available when the case was argued before the Income-tax Tribunal. The remedy of the department, it is submitted, was to represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were not business income but capital receipt and, therefore, not chargeable as income. Still it was held that the order of the Tribunal could be used as information for reopening the assessment on the footing that the amounts were chargeable to tax as capital gains. Another case which is similar on facts is the decision of the Allahabad High Court in CIT v. India Reconstruction Corpn. Ltd. [1968] 67 ITR 204. In that case, the assessee disclosed certain amount as profits on account of sale of securities. The ITO held the said amount to be the business income of the assessee. The AAC also took the same view. The Tribunal, in further appeal, held that the amount constituted capital receipt and that it should be excluded from the assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as binding on the ITO and he could not reopen the assessment over again to include the interest income. It will be seen from the facts of that case that reassessment proceedings once taken by the ITO to tax forest income and interest income were held to be without jurisdiction by the Tribunal although the Tribunal was obviously in error so far as the interest income was concerned. Still, as the Tribunal's order was final, it was held that the ITO could not start fresh reassessment proceedings to tax the same interest income. The facts of this case bear no analogy to the facts of the case before us. As already pointed out by us, the order of the AAC dated 21st March, 1973, cannot be read as holding that the amount received as compensation co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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