TMI Blog1994 (1) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the validity of the reopening of the assessment under section 147(b) of the Act in the light of the judgment of the Supreme Court in the case of Indian Eastern Newspaper Society v. CIT [1979] 119 ITR 996. 2. Original assessment in this case is stated to have been completed on 20-1-1976. Later on, reassessment was made on 9-11-1978 after issue of notice under section 148 read with section 147(b) on 18-3-1977. Neither the assessment records nor the original assessment order, nor even a copy of the reasons recorded by the ITO for reopening the impugned assessment could be filed before us by either of the sides on the ground of non-availability of relevant records due to misplacement of the same. It, however, appears from a perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us, the learned Departmental Representative first of all placed reliance on the decision of the Supreme Court in the case of R. K. Malhotra, ITO v. Kasturbhai Lalbhai [1977] 109 ITR 537. In this particular judgment, the Supreme Court had held the Audit Department to be the proper machinery to scrutinise the assessments of the ITOs and point out the errors, if any, in law. The Supreme Court thus finally concluded that the intimation received by the ITO from the Audit Department constituted 'information' within the meaning of section 147(b) in consequence of which the ITO could reopen the assessment. Be that as it may, it has however been found that the larger bench of the Supreme Court in its subsequent judgment in the case of Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and also further that while granting special leave, their Lordships specifically limited the question to considering the correctness of the decision of the Supreme Court in Indian Eastern Newspaper Society's case and directed the matter to be posted before a larger Bench. However, to the best of our knowledge, no decision by the said larger Bench of the Supreme Court against its abovementioned judgment in Indian Eastern Newspaper Society's case seems to have come as yet. Hence, for the present, the judgment of the Supreme Court in Indian Eastern Newspaper Society's case has got to be considered to be holding the field. 6. The learned DR has also relied on the following two decisions: (i) Zoraster Co. v. CIT [19871 163 ITR 85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be found that this judgment would not be of much help to the Department. 7. The Madras High Court, in its judgment in M.A. Murugappan's case, on the other hand, upheld the validity of reopening proceedings on the basis of an audit report pointing out certain obvious mistakes on the part of the WTO in applying the clear provisions of law, based on incorrectness on the part of the WTO as to certain basic facts. For example, the WTO had granted 50% deduction of tax by treating the assessee as non-resident whereas the Audit pointed out that the assessee was actually a resident but not ordinarily resident and hence, was not entitled to the abovementioned deduction applicable to the case of a non-resident only. Certain other factual errors we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded by the audit nor does the ITO seem to have arrived at such a finding by making a preliminary examination of the facts. In this particular case, therefore, although the ITO may be considered to be having information relating to the existence of debit balances in the accounts of the partners on the basis of the audit note, at the same time again, it is not possible to come to a conclusion that the ITO, on the basis of the facts on record had reasons to believe that income liable to be subjected to tax had escaped the original assessment. As discussed above, without making a preliminary examination about the link between the debit balances of the partners and the sources of funds for creating such debit balances, it was not possible to c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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