TMI Blog1976 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to the order of the Appellate Assistant Commissioner dated March 5, 1966, for re-opening the assessment ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Commissioner's letter dated May 13, 1966, constituted information from an extraneous source within the meaning of section 147(b)? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the reassessment proceedings are valid notwithstanding the order of the Appellate Assistant Commissioner dated March 5, 1966 ? The short facts that are necessary for appreciating the above questions are as follows : The assessee is an individual and carries on business as a contractor. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Madras. That officer, by an order dated 5th March, 1966, allowed the appeal preferred by the assessee. Thereafter, the question as to whether an appeal to the Tribunal against the order of the Appellate Assistant Commissioner of Income-tax, should be filed or not was considered by the Commissioner of Income-tax. On 13th May, 1966, the Commissioner of Income-tax sent the following communication to the Income-tax Officer : " No appeal to the Appellate Tribunal is necessary against the Appellate Assistant Commissioner's order first cited above. The Appellate Assistant Commissioner's order has been accepted, as the alternative remedy of re-opening the assessment under section 147(b) is available to withdraw the depreciation allowed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 154 of the Income-tax Act, 1961. However, in doing so, what the Appellate Assistant Commissioner did was not merely to hold that the mistake was not capable of being rectified under section 154 of the Act, but there was no mistake at all, or, in other words, there was no escapement of the taxable income. This is what the Appellate Assistant Commissioner has stated in his order : " So I consider that there is firstly no error capable of rectification in the assessment made by the Income-tax Officer originally because ultimately what he did was to arrive at the net income on a suitable basis by allowing a deduction in the name of depreciation, the Income-tax Officer was not really giving away anything. Perhaps, the same result might hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the appeal only on the ground that section 154 of the Income-tax Act, 1961, could not have been resorted to in the circumstances of the case. As the extract from the order of the Appellate Assistant Commissioner clearly shows that that order did not stop there, but it went into the merits and actually found that there was no mistake at all to be rectified, and the Income-tax Officer had not allowed any taxable income to escape. If so, the acceptance by the department of the order of the Appellate Assistant Commissioner makes that order final with the result that the conclusion of the Appellate Assistant Commissioner that there was no escapement of tax is also final. Once it has become so final, it is not open to the Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 34(1)(a) of the Indian Income-tax Act, 1922, as amended in 1948, observed : " It could not have been the intention of the legislature by amending the section to enable the Income-tax Officer to reopen final decisions made against the revenue in respect of questions that directly arose for decision in earlier proceedings. The Tribunal held in the earlier proceedings that the Income-tax Officer knew all the facts at the time he made the original assessment in regard to the income he later on sought to tax. The said finding necessarily implies that the Income-tax Officer had no reason to believe that because of the assessee's failure to disclose the facts income has escaped assessment. The earlier finding is comprehensive enough to ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer were the subject-matter of the appeal before the Appellate Assistant Commissioner. In this case, as already pointed out, the Appellate Assistant Commissioner held that there was no error at all, because no income escaped assessment. In those circumstances that order having become final and having been accepted by the department, it is not now open to the Income-tax Officer, on whom the said order is binding, to go behind that order and initiate proceedings under section 147(b) of the Income-tax Act, 1961, as if there had been escapement of income to assesment. In view of these circumstances, we answer the third question referred to us in the negative and in favour of the assessee. Since, by virtue of our answer to the third q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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