TMI Blog1980 (2) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... n the original return the petitioner had not made the claim for deduction under s. 80J, that is, relief in respect of a new industrial undertaking. In the assessment for this particular year, the petitioner who had claimed relief under s. 80J in respect of a new industrial undertaking, also claimed relief under s. 80M in respect of inter-corporate dividends, gratuity of Rs. 53,041 accrued and paid during the accounting year and extra shift depreciation allowance for plant and machinery including technical know-how. The ITO passed the order in the original assessment on January 3, 1977, and he allowed all the claims except the claim under s. 80J. An application under s. 154 was made to the ITO and thereafter the ITO by his order dated July 2, 1977, accepted the application and granted relief as claimed in the letter. Thereafter, the notice dated February 23, 1978, exhibit 'D' to the petition, was issued by the respondent stating that he had reason to believe that the petitioner's income chargeable to tax for the assessment year 1975-76 had escaped assessment and that he proposed to reassess the same and asked the petitioner to file a fresh return within thirty days. In order to avoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar concerned ....... .." The provisions of s. 147(b) have been interpreted by the Supreme Court in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996. Pathak J., speaking for the Supreme Court, has pointed out that the controversy before the Supreme Court in that case was whether the view expressed by the internal audit party of the I.T. department on a point of law could be regarded as "information" for the purpose of initiating proceedings under s. 147(b) of the I.T. Act. At page 1001 of the report, it has been pointed out that the correct definition of the word "information" in s. 147(b) of the Act is "instruction or knowledge derived from an external source concerning facts or particulars, or as to law, relating to a matter bearing on the assessment.": CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC). Then, Pathak J. states (at p. 1001): "In so far as the word 'information' means instruction or knowledge concerning facts or particulars, there is little difficulty. By its inherent nature, a fact has concrete existence. It influences the determination of an issue by the mere circumstance of its relevance. It requires no further authority to make it significant. Its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No authority is required for the purpose. " In this case, we have asked the learned Government pleader, Mr. G. N Desai, appearing on behalf of the respondent, to give us the audit objections raised on these four points in respect of which the reassessment proceedings were proposed to be started. We find from these audit objections that as regards s. 40A(7) the audit party put forward before the ITO its own interpretation of s. 40A(7) as compared to the interpretation of s. 40A(7) placed by the ITO at the time of the original assessment. The audit party was not drawing the attention of the ITO, the respondent herein, to any formal expression of law, either legislative or judicial or judge-made law, and to that extent "information" cannot be said to have been given on the point concerning s. 40A(7). It is possible that the view taken by the ITO in the original assessment regarding the interpretation of s. 40A(7) was not correct but the audit party was not drawing the attention of the ITO to any formal expression of law, judge-made or legislature made, when it put forward its own interpretation of s. 40A(7). Therefore, there was no "information" within the meaning of s. 147(b) so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Indian Aluminium Co. Ltd. [1977] 108 ITR 367 (SC) and Textile Machinery Corporations [1977] 107 ITR 195 (SC), both being decisions of the Supreme Court, this relief was admissible for the unit also. The reasoning of the ITO was not acceptable to the audit party unless it was established by detailed examination whether all the five tests laid down by the Supreme Court were fulfilled in this case. Nor is there any factual aspect about which the ITO received information from the audit party regarding the N.I.P. Expansion unit installed, by the petitioner-company as far back as 1970. It appears from the order dated September 20, 1978, passed by the Commissioner (Appeals), annex. 'C' to the petition, that this plant was installed in the year 1970 and in respect of the assessment year 1971-72 the question arose whether s. 80J relief could be granted in respect of this plant. The matter went in appeal and the Commissioner (Appeals), following the two decisions of the Supreme Court in Textile Machinery's case [1977] 107 ITR 195 and Indian Aluminium Co. Ltd.'s case [1977] 108 ITR 367, held on the facts that the N.I.P. Expansion unit was a new industrial undertaking within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Textile Machinery Corporation [1977] 107 ITR 195, the Supreme Court approved the decision of this High Court in Nagardas Bechardas Brothers P. Ltd. v. CIT [1976] 104 ITR 255. In that case, this High Court has held (p. 265): " Though every case must depend upon its own peculiar facts, a broadly correct solution can be arrived at by asking two questions: (1) Whether there was any activity in the existing business which could have been reconstructed and could have assumed a new form on such reconstruction; and (2) Whether the nature of the business which has assumed a new form as a result of the change which is introduced, is the same as the nature of the business which was existing before the change was introduced. If either of these two questions is answered in the negative, it would mean, prima facie, that there is no 'reconstruction' which would attract clause (i) of section 84(2) (now section 80J(4)(i)) of the Act." It is clear so far as s. 80J objection is concerned regarding N.I.P. Expansion unit that in the light of the decision of this court which was available to the ITO when he passed the original order of assessment that decision having now got the imprimatur of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s affidavit says that he was informed on facts by the audit party and no facts regarding s. 80J or on any of the other three points are on scrutiny found to be "information" within the meaning of s. 147(b). The petitioner-company was informed that the proceedings under s. 147(b) were being taken in respect of four points, namely, extra shift allowance so far as depreciation allowance was concerned, s. 40A(7) so far as gratuity was concerned, s. 80J relief and the question of s. 80M. On none of those four points was information forthcoming from the audit party within the meaning of s. 147(b) as interpreted by the Supreme Court in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996. Hence, it is obvious that the condition precedent for the exercise of powers under s. 147(b) was absent in the instant case and the notice issued by the respondent on February 23, 1978, was illegal and void in law and must be quashed. Under these circumstances, this special civil application is allowed and the rule is made absolute with costs. The notice dated 23rd February, 1978, is quashed and set aside and the respondent is restrained by permanent injunction from giving effect to the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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