TMI Blog1978 (3) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... the above-mentioned years were not set out either in the affidavit-in-opposition filed on behalf of the revenue or in any of the annexures thereto, they were produced before me from the records at the time of the hearing. By consent of parties, copies of all the recorded reasons for the aforementioned years have been kept in the records of these cases. In respect of the assessment years 1958-59 to 1966-67, one of the reasons recorded by the ITO for initiating the proceedings is common. The reason is that the contribution by the petitioner to the Grindlays Superannuation Fund has been claimed as an admissible expenditure and the same has been wrongly allowed from year to year in the computation of the total income of the petitioner. Mr. B. L. Pal, learned advocate appearing on behalf of the revenue, submitted that for all the aforementioned years, namely, 1958-59 to 1966-67, there were two non-disclosures by the assessee in respect of the above years. First, the assessee did not disclose that the contribution to the Grindlays Superannuation Fund was debited to the Indian profit and loss account of the petitioner. Secondly, no evidence was produced at the time of the original as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures of this expenditure debited to the Indian P L A/c with regard to the Grindlays Superannuation Fund. In the premises, it was submitted that the alleged non-disclosure or alleged omission does not feature in the recorded reasons for the years 1958-59 and 1966-67 and, therefore, is beyond the scope of consideration, at least for these two years. In so far as the other assessment years are concerned, Dr. Pal contended that the allegation that the assessee did not disclose that the expenditure debited to the Indian P L A/C included contribution to the Grindlays Superannuation Fund is not correct and is contrary to the materials on record. It was submitted, as has been stated in the petition, that at the time of the original assessment for the year 1958-59, the assessing ITO made enquiries regarding this contribution and the petitioner stated before the officer that excepting the letter dated 19th November 1956, written by the manager of the Bombay branch of the then Grindlays Bank to the general manager of the Grindlays Bank in London, there is no other record available. This letter which is annexure "Z" to the first petition contains the following paragraph: "It will be obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 29 of the second affidavit-in-opposition one Mr. H. P. Roy who affirmed the affidavits, simply states that there was nothing on record to show that the materials alleged by the petitioner had been placed before the concerned ITOs or that they had any occasion to apply their minds thereto. The argument goes on to say that this averment in the affidavits-in-opposition is worse than useless and should be completely ignored. This is because as pointed out by Dr. Pal it is hardly likely that any discussion which took place between the petitioner's authorised representatives and the assessing ITOs could find place in the records in the possession of the department. In the absence of any affidavit from the ITOs who made the original assessments, there could be no effective denial of the averments made in the petition. Mr. H. P. Roy who had affirmed the affidavits did not make any of the original assessments. Strong reliance is placed by Dr. Pal on my own decision in the case of Dunlop Rubber Company Ltd. (London) v. ITO [1971] 79 ITR 349 (Cal). At pages 358 and 359 of the report, I observed as follows: "On the basis of the above pleadings, Dr. Pal invites me to hold that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turally, his knowledge is confined to the record. He has made vague statements in his affidavit and the original records have not been produced. I think that, on the facts, the petitioner's case is almost uncontradicted. Statements made, which are based on information received from the records which are not produced are worse than useless.' In the present case also, I cannot but help coming to the same conclusion, namely, that in spite of specific allegations made by the petitioner that the relevant and material facts were before the original assessing officer, there has been no denial which merits a serious consideration by this court. The only two ITOs who could have thrown any light on this question of non-disclosure by the petitioner are the original assessing officer, Sri A. K. Jana, and the officer who issued the impugned notice, namely, Shri D. K. Gupta. None of them has come forward to pledge their oath before me." Although Dr. Pal was not unmindful of the fact that, in the case cited immediately above, neither the assessing officer nor the officer who issued the notice had filed any affidavit and in the case before Sinha J. (as he then was) the records were not produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that in the "unrecognised superannuation fund", which is mentioned in paras. 19(a) and (b), also in para. 18(g) of the first affidavit-in-opposition has been wrongly equated and identified with the Grindlays Superannuation Fund. It was pointed out that the Grindlays Superannuation Fund was kept only in respect of the expatriate employees of the erstwhile Grindlays Bank working in India. The "unrecognised superannuation fund" was only in respect of the employees in the London office which was maintained in the London office and was debited to the London charges. The said London charges were never taken into account in the computation of the head office general charges, a proportion of which was allocated to the Indian business on the basis of the formula accepted since 1948. Reference was also made by Dr. Pal to several letters between the income-tax department and the petitioner whereby this point was clarified and specific mention was made to the Grindlays Superannuation Fund. It was further submitted, with reference to those letters, that contribution to this fund could not and in fact did not ever appear in the expenses of the head office but appeared as a debit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was pointed out that my decision mentioned above has been affirmed by the court of appeal in Appeal No. 244 of 1973 in which the judgment of the Bench was delivered by A. N. Sen J. on the 10th March, 1977 (ITO v. Hongkong and Shanghai Banking Corporation-since reported in [1978] 115 ITR 582 (Cal) [DB]). The revenue wanted to appeal to the Supreme Court from the aforesaid order of the court of appeal. The application for special leave under art. 136 was, however, dismissed by the Supreme Court consisting of Krishna Iyer and Untwalia JJ. on 2nd December, 1977. Adverting to the other aspect of this alleged omission, viz., the omission or failure to give evidence on the question that the aforesaid superannuation fund was a recognised one, Dr. Pal points out that whether the contribution to an unrecognised provident fund is to be allowed as a business expenditure is a matter essentially for the ITO to decide having regard to the relevant judicial decisions and provisions of the relevant I.T. Acts. Dr. Pal in this connection draws my attention to the decision of the Supreme Court in the case of Metal Box Company of India Ltd. v. Their Workmen [1969] 73 ITR 53. In this decision, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out that this clearly postulates that the concerned ITO knew about it, but wrongly allowed the claim. If that is so, this is, at the highest, an error on the part of the officer concerned. In other words, this cannot be attributed to any omission or failure on the part of the assessee. In this connection, my attention was drawn once again to the case of Calcutta Discount Company Ltd. v. ITO [1961] 41 ITR 191 (SC), at page 206 of the report, where the Supreme Court negatived the plea that the memorandum and articles of association of the appellant-company were not disclosed at the time of the original assessments. The Supreme Court observed that it was unthinkable that the ITOs would not examine these documents. In the instant case, Dr. Pal contended that it is unthinkable that the concerned ITO did not make any enquiries with regard to these contributions to the superannuation fund. On the strength of the above materials Dr. Pal confidently asserted that there had been no material disclosed in the recorded reasons which had any rational connection to the formation of the belief that the income for the relevant assessment years had escaped assessment on account of any omissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice staff on account of provident fund, pension fund, superannuation fund, commutation fund, are not debited to the head office. General charges are allocated to the territories and are, therefore, beyond the ambit of Indian taxation. These are part of the London charges and there is no question of allocating them in respect of their overseas bank. With reference to the affidavits and the correspondence Dr. Pal points out that the allegation that the contribution to the Grindlays Superannuation Fund was subsequently discovered to have been debited to the Indian profit and loss account although it was stated to have been debited to London charges is not only a false and incorrect statement but betrays a complete confusion of thinking of the deponent-ITO. The ITO proceeds on the erroneous assumption as if it had been stated in the correspondence between the assessee and the ITOs that the contribution to the Grindlays Superannuation Fund had been debited to the London charges and then builds up his case that subsequently he had discovered that the said contribution to the Grindlays Superannuation Fund was debited to the Indian profit and loss account. It was submitted that the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coming into the possession of the ITO and the formation of his belief. I was invited to hold that the same principles were applicable to the present case. As I have already indicated, in my view, there is no omission or failure on the part of the assessee on this account. Mr. B. L. Pal for the revenue relied on a decision of this court in the case of Bachulal Kapur v. ITO reported in [1976] 2 CLJ 506 (sic). In that case, after a consideration of all the relevant materials, this court held that the contention of the revenue should succeed. Dr. Pal, in the course of his argument, and also in the written submissions that he had filed at the conclusion of the arguments, mentioned various reasons why the judgment was distinguishable. In the first place, he pointed out that it was a case of loan transaction and not a case of claiming an expenditure by way of deduction. He further argues that the case was not made out on behalf of the assessee that the information did not relate to the relevant assessment year as has been argued in the present case. He again contended that it is unthinkable that in the relevant years of assessment the ITO had not gone into this question and made intel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Dr. Pal strongly contended that the CBR had taken the view that this claim should be allowed. He pointed out that the expression "used for the purpose of business" in the relevant section does not mean only actual user but can also refer to machines which are capable of being used or are ready for use. He relied on several decisions of the English courts and our courts. In this connection reference was made to the English case of Blackdown Properties Ltd. v. Ministry of Housing and Local Govt. [1967] 1 Ch 115 at pages 119, 122 (Ch D). Reference was also made to the case of CIT v. Viswanath Bhaskar Sathe [1937] 5 ITR 621 (Bom) and the case of Niranjan Lal Ram Chandra v. CIT [1963] 49 ITR 177 (All) at pages 182, 183. It is not necessary for me to analyse the legal authorities cited above because I do not have to come to the conclusion whether the claim for depreciation is allowable or not. That is a matter which is for the revenue authorities to decide. Dr. Pal, in my opinion, rightly contended that so long as the fact of the claim on account of these machines was before the assessing authorities, the question whether they were legally allowable or not is an inference to be arri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO [1970] 77 ITR 999 (Cal). Reference was also made to the unreported judgment of Sabyasachi Mukharji J. in the case of Smt. Minoti Halder v. ITO in C. R. Case No. 1097 (w) of 1973 in which the judgment was delivered an 8th September, 1975 [since reported in [1978] 115 ITR 471 (Cal)] and of Deb J. in Metal Distributors Ltd. v. ITO (Matter No. 455 of 1973) in which the judgment was delivered on 5th December, 1975 [since reported in [1978] 115 ITR 608 (Cal)]. On the question of "information" within the meaning of s. 147(b) of the Act, Dr. Pal relied on a decision of the Supreme Court in the case of CIT v. Dinesh Chandra H. Shah [1971] 82 ITR 367 and also the decision of the Supreme Court in the case of Bankipore Club Ltd. v. CIT [1971] 82 ITR 831. It was pointed out by Dr. Pal that the information alleged to have been received by the revenue is admittedly in connection with the assessment year 1971-72 for which the accounting period is 1970. It is the admitted position that the organisation of the head office had radically changed as a result of the reorganisation of the chairman's office in the year 1970. Therefore, the head office expenses in the year 1970 and the items includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any opinion which could be an "information" within the meaning of s. 147(b) of the Act, it was submitted that the opinion must be of a person, body, authority or authorities competent and authorised to form the opinion of pronouncing the law as was held in the case of R. K. Malhotra v. Kasturbhai Lalbhai [1977] 109 ITR 537 (SC). It was submitted that the Public Accounts Committee was not competent to form such an opinion. In my view, the contention of Mr. Pal must be accepted. On the materials and on the submissions made, I find that even for the assessment years 1969-70 and 1970-71, there is no "information" within the meaning of s. 147(b) of the Act which could justify the reopening. This disposes of all the contentions raised on behalf of the parties. In the result, this application succeeds and the rule is made absolute. There will be a writ in the nature of mandamus calling upon the respondents to forthwith recall, cancel and withdraw the notice under s. 148 of the Act in respect of years 1958-59, 1959-60, 1960-61, 1961-62, 1962-63, 1963-64, 1964-65, 1965-66, 1966-67, 1967-68, 1968-69, 1969-70 and 1970-71 which are the subject-matter of these two applications. There w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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