TMI Blog1990 (12) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... er under section 143(3) on 22-9-1978 on a total income of Rs. 80,900 (exactly the same as returned by the assessee). Continuing chronologically; the Income-tax officer issued notice under section 154/155 in printed proforma in ITNS 8 (i.e. Income-tax Non-Statutory forms series Form No. 8). The assessee replied vide letter dated 19-1-1980. Ultimately, the Income-tax Officer did not pass order under section 154/155, but he reopened the case under section 147 and sent a notice under section 148 dated 22-3-1980 calling upon the assessee to again file a return of income. That notice under section 148 was duty served on the assessee on 10-4-1980. But the assessee filed return only on 10-2-1983 and of course under protest. In the meantime in December 1980 search and seizure operations under section 132 had taken place on the assessee's premises and some other premises. Department has claimed that lot of incriminating papers and materials were found. On 30-3-1983, ultimately the Income-tax Officer completed assessment under section 143(3) read with section 147 on a total income of Rs. 67,72,177. The assessee filed an appeal before the Commissioner (Appeals) who mentioned it as heard on 27- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year ending on 31-3-1978. We may further note that in response to the notice under section 154 for rectification of mistake, the assessee had replied vide letter dated 19-1-1980 that the loan amount of Rs. 4 lakhs was due to the assessee from M/s. Sippy Films on 13-3-1978 but this amount was renewed for six months and interest of Rs. 30,000 was payable. Therein, the assessee further stated as follows: ".......... M/s. Sippy Films sent me cheque for Rs. 27,000 and also certificate for 10% deduction at source. The amount of 10% was paid to Reserve Bank of India. With the cheque of Rs. 27,000 a request was made by the Sippy Films............... that we should present the cheque of Rs. 27,000 on or after 1-4-1978...... As such, I deposited the cheque of Rs. 27,000 towards interest received on 2-4-1978 and this amount is the income of assessment year 1979-80 adding Rs. 3,000 (10% deducted at source) making a total of Rs. 30,000 .........." Thus, the assessee's stand was that cheque for Rs. 27,000 was received by the assessee before 31-3-1978 but at the request of the debtor, it was presented by the assessee to the Bank for clearance on 2-4-1978. As already mentioned, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fool-scap paper with the original return of income. Xerox copy of the same finds place on page 5 of the assessee's first compilation and for the sake of ready reference a xerox copy of that paper is made annexure 'A' to this order. The contents thereof may be reproduced as follows: "1-4-77 to 31-3-78 The interest earned is Rs. 53,700 whereas the tax deduction at source is Rs. 8,370 (this is because the cheque for Rs. 30,000 towards interest from Sippy Films was credited after 1-4-1979 and since they had issued the cheque for interest prior to 31st March 1978 they deducted 10% and deposited in Reserve Bank of India and gave us the Certificate which we have claimed in this period)." (Emphasis supplied) Obviously, this contains two very serious factual errors of figure and date firstly, it says that cheque was for Rs. 30,000 and secondly, it says that it was credited after 1-4-1979. The fact of the matter is that the cheque was for Rs. 27,000 and it was credited after 1-4- 1978. Such serious errors of figure and date in the contents of that paper on which the assessee relied that there was no omission on his part to disclose fully and truly all material facts go to the route ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already mentioned, the Income-tax Officer did not pursue notice u/s. 154/155 after receipt of assessee's reply dt. 19-1-1980 but proceeded to reopen the case under section 147. Thus, all the three conditions prescribed in sec. 147(a) are satisfied. 8. This brings us to section 148 whose sub-section (1) talks of issuance of notice by the Income-tax Officer and it is admittedly satisfied. Sub-sec. (2) of sec. 148 reads as follows: " 148. (2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so." So, the Income-tax Officer has to record reasons for issuing notice under section 148. Those reasons dated 7-3-1980 are contained on page 8 of the second compilation furnished by the department. They are as follows: "It is seen from the records that for A.Y. 1978-79 the assessee was assessed on an interest income of Rs. 53,700. From the certificate of deduction of tax from interest filed by the as in form No. 19A. It is seen that the assessee has claimed deduction of tax of Rs. 3.000 on Rs. 30,000- being the amount of interest on loan of Rs. 4,00,000 advanced to Sippy Films Ltd. However, the assessee was given credit on tax of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as a mistake apparent from the record which could subsequently be termed by him as an inadvertent mistake. It was, in this context that even in the reasons recorded dated 7-3-1980, he, perhaps used the word inadvertently. In other words, we are inclined to think that the Income-tax Officer in his reasons recorded dated 7-3-1980 used the word 'inadvertently' rather inadvertently (i.e., through his own inadvertence). We are therefore inclined to hold that all the conditions laid down for reopening under section 147(a) are satisfied in this case. 10. We may now, quickly refer to the cases cited by the learned Advocate for the assessee for canvassing that reopening under section 147 was not proper. The learned Advocate for the assessee pointed out that the department has not mentioned that reopening is under section 147(a) or 147(b), but he would address his arguments, on both the clauses. He stated that since the department's burden under sub-clause (b) was slightly of the two he would first address us on that provision. He emphsised that mere change of opinion on the basis of some material available on record does not justify reopening under section 147(b). He urged that there sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged disclosures contained in annexure 'A' to this order. We have already held that there were material mistakes and omissions in the contents of that paper. So, the disclosure even on basic facts was neither true nor complete. The above mentioned two decisions of the Supreme Court do not help the assessee. The Supreme Court decisions in Gemini Leather Stores' case does not come to the assessee's rescue, because in that case, the information had been collected by the Income-tax Officer but through oversight it was not made use of in the original assessment order. Obviously in the case before us, there was no information collected by the Income-tax Officer which was left to be used in the original assessment order. The Calcutta High Court decision in Calcutta Credit Corpn. Ltd.'s case also does not help the assessee because in that case, primary facts were disclosed and the Hon'ble High Court held that it was the duty of the Income-tax Officer to make investigation. in the case before us, primary facts had not been disclosed truly and fully up to the date of original assessment, i.e., 22-9-1978 nowhere had the assessee stated that he had received a cheque for Rs. 27,000 towards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation, one Mr. Bahirwani, he received from Mr. Abdul Rahim Zarwani of Dubai through banking channels a gift of Rs. 1,00,000 in October 1977. The Income-tax Officer disbelieved this story and added back the said sum of Rs. 1,00,000. The Commissioner (Appeals) accepted the explanation given by the assessee and deleted the addition. On behalf of the department, the plea taken was that the assessee did not know even the donor. Assessee's reply was that since it was at the behest of Mr. Bahirwani, this did not make any difference. The learned Departmental Representative argued that the confirmations from the donor, Mr. Rastagar Zarwani and from the Bank of Oman Limited dated 7th December, 1983 were received after the date of the Commissioner(Appeals)'s order. It was further pleaded that in the bank documents, donor or remitter's name was Abdul Rahim Zarwani. While in the confirmation letter dated 7th Dec., 1983, the signatory was Rastagar Zarwani. The learned Departmental Representative therefore claimed that the ratio decidendi of the Tribunal's decision dated 27th July, 1982 in the cases of S/Shri Bharat Nariman, N.K. Gajwani, Ravi Nariman and Smt. Kanchan Nariman in ITA Nos. 571 (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are from the same donor Mr. Rastagar Zarwani. The reasoning given in that order of the Tribunal would apply mutatis mutandis to this item of Rs. 1,00,000 also. On this point, therefore, we would reject the department's contentions and uphold the view taken by the Commissioner (Appeals). 15. Department's ground of Appeal No. 9 is directed against the deletion of Rs. 65,61,275 comprising of additions of undisclosed loans given and interest thereon. These additions pertain to the loans given in the respect of different pictures or movies and the position may be tabulated as follows: ---------------------------------------------------------------------------------------------------------------------------------------------------Sl.No. Name of the Principal Interest Total Picture amount --------------------------------------------------------------------------------------------------------------------------------------------------- (i) (ii) (iii) (iv) (v) --------------------------------------------------------------------------------------------------------------------------------------------------- 1 . Shan (Sippy Films) 24,00,000 2,16,000 26,16,000 2. Chakravyuha 4,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the information is as follows: --------------------------------------------------------------------------------------------------------------------------------------------------- Sl.No. Territory Amount Date of Lab letter --------------------------------------------------------------------------------------------------------------------------------------------------- (i) (ii) (iii) (iv) --------------------------------------------------------------------------------------------------------------------------------------------------- 1. Bombay 24,00,000 28-11-1977 2. Bengal 15,00,000 13-09-1978 3. East Punjab 5,00,000 17-09-1979 ------------------ 44,00,000 ------------------- Thus, the assessee admits of having forwarded Rs. 44 lakhs as loan in this connection in the names of the assessee and the other family members. It is claimed that all the three items of loans are supported by respective agreements and almost all loans given as well as amounts received are by cheques. The copies of the corresponding agreements are also incorporated in the compilation furnished by the assessee and those agreements are dated 29-8-1977,4-9-1978 and 7-9-1979 for Lab letters i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s financiers and refers to Bombay territory as security. The other letter is in the same format and of the same date viz., 28-8-1977 but mentions as financiers 'Shri Jotumal T. Thawani' and refers to Delhi and U.P. territory as security. Similarly, we have two Lab letters, both of the same date viz., 28-11-1977 almost in the same format. One is addressed to Shri Devidas J. Thawani and offers Bombay territory prints as security while the other is addressed to Shri Jotumal T. Thawani and offers Delhi and U.P. circuit prints as security. Now the assessee's case is that mere existence of two letters referring to Delhi and U.P. territory and naming Shri Jotumal T. Thawani does not represent any transaction beyond one represented by the other set of two letters dated 28-8-1977 and 28-11-1977 referring to Shri Devidas J. Thawani and Bombay territory. In support of this contention, the learned Advocate for the assessee has argued that for the Bombay territory loan given is supported also by a detailed agreement between the assessee and his family members as financiers and the producer in M/s. Sippy Films. That agreement has been kept on pages 58 to 71 of the assessee's compilation. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an advanced was very substantial. We may mention that the learned Departmental Representative as well as the learned Advocate for the assessee have referred us also to the statement of loans given shown at Rs. 44 lakhs from 14-6-1977 to 18-10-1979. In particular, the learned Departmental Representative's point was that upto the date of request from M/s. Sippy Films to the Film Centre viz., 28-8-1977 a sum of hardly Rs. 4,05,000 had been forwarded as per the date-wise statement of the loans given and at that time there could not be any necessity of seeking additional security on the plea that very huge amounts were required to be given as loans. The learned Advocate for the assessee has disputed this position also and has pointed out that upto the date of Lab letter dated 28-11-1977, a sum of Rs. 28 lakhs had already been given even as per that statement of loans from 24-6-1977 to 18-10-1979. 20. We have very carefully considered the rival submissions. At the outset, we may mention that there is no escape for the assessee from the existence of two sets of letters dated 28-8-1977 and Lab letters dated 28-11-1977 out of which the assessee admits loan given in respect of only one se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly shown as given by Shri Jotumal T. Thawani in the disclosed and admitted transactions. When arrangement is entered into for forwarding of Rs. 44 lacs and originally, Rs. 24 lacs by Shri Devidas J. Thawani Others, it is not clear how the additional security was furnished for Delhi UP territory in the name of Shri Jotumal T. Thawani. Further, in none of the documents, there is any mention of Delhi and UP territory having been given as additional security for the admitted loan given in respect of Bombay territory. In our opinion, there is not much of substance in yet another argument of the learned Advocate for the assessee that in any court of law, the assessee could not have recovered any money merely on the existence of Lab letter. The point is that we are not examining whether the security in the form of Lab letters was really enforceable in a Civil Court but we are examining whether the persons concerned in the trade would have regarded the Lab letter as reasonably constituting security for the loan. Department's inability to find an agreement between the financier and the producer pertaining to Delhi and UP circuit does not prove that the said agreement did not exist at an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational to the processing laboratory M/s. Film Centre and also Lab letter dated 1-6-1977 addressed to the assessee - Shri Jotumal T. Thawani. In this item also, it is important to note that the Lab letter kept on pages 41 to 45 of the department's compilation is duly authenticated on behalf of the assessee with the remark 'we agree and confirm the above'. In this particular case, there is yet another document which is letter dated 23-6-1979 written on behalf of the assessee to M/s. Film Centre which is in the following terms: "Re: Picture "CHAKRAVYUHA" for Delhi UP Circuit. Please cancel the confirmation letter issued by you and you are free to deliver the release prints of the above picture to the producers." The reasoning given here-in-above in the context of picture 'Shan' would apply mutatis mutandis to this item also and if anything with greater force because there is, on record, assessee's letter dated 23-6-1979 releasing M/s. Film Centre from the responsibility of the confirmation letter in the form of Lab letter dated 1st June 1977. Herein also, however, the quantification of amount to be added needs further processing and opportunity of being heard to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement in respect of picture 'Swami' for Delhi-UP and Bengal circuit stands admitted by the assessee in view of the letter dated 18-10-1977. For this item, we would uphold the department's contention that the existence of reasonable inference of some money having been forwarded by the assessee but for quantification of the same, we would restore the matter to the file of the assessing officer for doing the needful as indicated above in respect of other pictures and items. 25. Item No. 5 in the chart of para 15 on page 16 of our order is that of Rs. 4 lacs for the picture 'Muqudar Ka Sikandar'. The Commissioner (Appeals) has discussed it in paras 18 and 19 of his order and has taken a decision in favour of the assessee in para 39 of his order. Relevant papers are contained on pages 57, 58 and 59 of the department's compilation and the lien relates to the territory of Delhi and UP. Again, the financial arrangement mentioned is in the name of Shri Jotumal T. Thawani. The assessee admitted an advance of Rs. 8,00,000 by some of his family members to the concerned producer against the lien of Bombay and Bengal territories and claimed that Delhi-UP territory was given to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture 'Aafat' for the territory of Bombay without collecting a sum of Rs. 75,000 on assessee's behalf, or getting a clearance letter from the assessee. On page 63, there is assessee's letter dated 1st June, 1977 addressed to the processing laboratory which gives the background of the letter dated 19th April, 1977 from the processing laboratory, which is mentioned above and then in the end says as follows: "I record that I have no claim against the said M/s. Gurudutt Film Combine in respect of the amount of Rs. 75,000 or any part thereof and that you need not recover any amount from them on my behalf." It was submitted on behalf of the assessee, that merely on the basis of these two documents, it cannot be reasonably inferred that the sum of Rs. 75,000 or any sum at all was forwarded by the assessee to the producers M/s. Gurudutt Film Combine in respect of Bombay territory. We have considered the submissions and we find that for this particular case, there is not even the usual Lab letter existing and further time gap between these two letters not even two months, i.e., the security is created on April 19, 1977 and it is released on 1st June, 1977. It does not reasonably prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a signatory or a confirming party to any one of them. Department's reliance thereupon turns on letters exchanged between the assessee's Advocates M/s. Madhukar Munim Co. and the Advocate of M/s. A.K. Movies viz., Shri C.B. Wadhava. That was in connection with some criminal proceedings which were subsequently withdrawn and the papers are of the year 1981. The department has estimated Rs. 15 lacs as loan forwarded by the assessee, in respect of this picture 'Yaarana' or 'Yaar Mera' but there is no basis for the same. Now, the first and foremost thing is that these letters are exchanged between the Advocates of the parties for making claims and counter-claims as well as allegations and counter-allegations. On page 4 of the letter dated 15th July, 1981 of assessee's Advocates M/s. Madhukar Munim Co. there is mention of Shri Jotumal T. Thawani and family members having advanced certain amounts for the said picture 'Yaarana' and then talks of requirement of Rs. 15 lacs sometime in July/August 1978 for the new picture 'Karishma'. In that letter on page 6, there is mention of Rs. 2,21,000 as given by the assessee to M/s. A.K. Movies and M/s. Pushpa Pictures for the picture 'Yaarana'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 1st Sept., 1977 from the producers M/s. Suresh Desai and Associates to the processing laboratory M/s. The Famous Cine Laboratory indicating some financial arrangements with Shri Jotumal T. Thawani, the assessee for Bengal (Eastern circuit) and assurance should be given that release prints of the said picture should not hand over without receiving the confirmation of the assessee. On page 39, there is another very simple letter from the processing laboratory to the assessee confirming that the release prints of the picture 'Suhag' would not be given by the laboratory without receiving a written confirmation from the assessee. The Commissioner (Appeals) has discussed this in paras 10 and 11 of his order and has allowed relief in para 35 of the appellate order. The Income-tax Officer has sought to make it as a protective addition and has referred to the addition of Rs. 20 lacs made in assessment year 1979-80, vide para 6 on page 7 of the assessment order. The Commissioner (Appeals) has held that the addition cannot be made merely on the basis of Lab letter. On careful consideration, we find that the respect of this item, addition of Rs. 9 lacs cannot be sustained in asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a decision appropriately after giving the assessee a reasonable opportunity of being heard. 32. Thus, to recapitulate: (a) On the question of validity of reopening under section 147, the decision of the Commissioner (Appeals) is reversed and it is hereby held that reopening under section 147 was validly done. (b) Deletion of addition of Rs. 1 lakh for gift received from abroad is approved and the department's ground of appeal in that regard is rejected. (c) Out of additions made for loans given for different pictures, loans totalling Rs. 24,75,000 (Rs. 75,000 for Aafat, Rs. 15,00,000 for Yaarana and Rs. 9,00,000 for Suhag at Sl. Nos. 7, 8 9 of the chart given on page 16 of the order) cannot be made. Those items and corresponding interest of those items have been rightly deleted by the Commissioner (Appeals). (d) In respect of remaining items of Rs. 36 lacs pertaining to the items at Sl. Nos. 1 to 6 of the chart on page 16 of this order, the department's right to make additions is upheld but for quantification of respective amounts, the matter is restored to the file of the assessing officer. Similarly, quantum of interest to be added is also to be re-adjudicated upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 10(3) of CDS Act, 1974 for late payment of CDS. Sd/- 22-9-78 (M.V. Sahasrabudhe) 7th Income-tax Officer, B-I Ward, Bombay. Copy to the assessee. (M.V. Sahasrabudhe) 7th ITO B-I Ward, Bombay. Office Note: The a received a gift of Rs. 1,00,000 from Shri Abdul Rahim Zarwani, Dubai through Bank of India as per certificate of Foreign Inward Certificate No. 35895 dt. 18-10-1977. A Note is kept on the order sheet dt. 22-9-78 about it. Sd/- 22-9-78 7th ITO, B-1 Ward, Bombay. Subsequently, the above assessment stood reopened and 'extract of the reasons for reopening the assessment' for 1978-79 recorded by ITO, B-I Ward, on 7-3-1980 reads as under:--- 'It is seen from the records that for A.Y. 78-79 the assessee was assessed on an interest income of Rs. 53,700, from the certificate of deduction of tax from interest filed by the assessee in form No. 19A. It is seen that the assessee has claimed deduction of tax of Rs. 3,000 on Rs. 30,000 being the amount of interest on loan of Rs. 4,00,000 advanced to Sippy Films Ltd. However the assessee was given credit on tax of Rs. 3,000 received at this verying interest. The amount of Rs. 30,000 received by the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months and interest of Rs. 30,000 was payable to me by M/s. Sippy Films. M/s. Sippy Films sent me cheque of Rs. 27,000 and also Certificate for 10% deduction at source. The amount of 10% they paid to Reserve Bank of India. With the cheque of Rs. 27,000 a request was made by M/s. Sippy Films that they have to liquidate their overdraft with bank on 31-3-78 and we should present the cheque of Rs. 27,000 on or after 1-4-78. Since the request was from my customer I could not refuse as more so if I force the payment and deposit the cheque I knew it will be dishonoured spoiling my relations with M/s. Sippy Films from whom I have to receive large amount of Rs. 4,00,000 and on the other hand reputation of M/s. Sippy Films with bank will be spoiled. As such I deposited the cheque of Rs. 27,000 towards interest received on 2-4-78 and this amount is the income for A.Y. 1979-80 adding Rs. 3,000 - 10% deducted at source making a total of Rs. 30,000 1 have not to claim any deduction as certificate of Rs. 3,000 . I have submitted with return for A.Y. 1978-79 and will give full credit of Rs. 30,000 earned in return for A.Y. 1979-80. Now I explain as to why I claimed Rs. 3,000 as deduction during A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1: For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where income chargeable to tax has been under-assessed; or (b) where such income has been assessed at too low a rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been computed. Explanation 2: Production before the Income-tax Officer of account books or other evidence from which material evidence could with due deligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section.' 5. Under clause (a) of the above section 147, the already completed assessment could be reopened if the Income-tax Officer has reason to belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apart, the reasons for reopening have been recorded on 7-3-1980. Notice under section 148 is dated 22-3-1980, having been received by the assessee on 10-4-1980. Action under section 154 of the Act was contemplated by insuance of notice and the date of hearing fixed was 19-1-1980. In view of this reasoning also, facts of assessee's case did not attract provisions of section 147 of the Act. Section 154 of the Act deals with the subject matter, 'rectification of mistakes'. It provides that, 'with a view to rectifying any mistakes apparent from the record .....' A mistake apparent from record is a mistake floating on the surface and is a mistake, which glares you and stares you in the eyes. Section 154 could be invoked only when all the facts full and correct and true were on the file and if that be the position, then within the meaning of section 147, there cannot be said to be any omission or lapse on the part of the assessee to disclose fully and truly all material facts necessary for assessee's assessment, much less that there was any subsequent information in the possession of the Income-tax Officer. Section 147, on these facts, could not have been applied, since the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is obliged under the provisions of the Act to disclose the facts fully and correctly and in full details, which he did. That apart, as mentioned above, Income-tax Act being a very complex one, everybody, for that purpose even the experts, cannot be said to know the intricate provisions, more so when there are amendments and amendments very often. The Central Board of Direct Taxes, vide letter F. No. 81/27/65-IT(B), dated 18-5-1965, item 448 - Administrative instructions for guidance of Income-tax Officers on matters pertaining to assessment -, has, inter alia, instructed the Assessing Officers to advise the assessees on matters pertaining to the assessment in the following terms:- '(1) The Board have issued instructions from time to time in regard to the attitude which the Officers of the Department should adopt in dealing with assessees in matters affecting their interests and convenience. It appears that these instructions are not being uniformly followed. (2) Complaints are still being received that while Income-tax Officers are prompt in making assessments likely to result into demands and in effecting their recovery, they are lethargic and indifferent in granting refunds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee having placed his cards bona fidely, truly and fully disclosing all the facts for his assessment in the return and at the time of assessment, it was for the Income-tax Officer also to guide him as to the claim for TDS whether tenable or not in relation to assessment year under appeal, particularly when the method of accounting employed by the assessee was 'cash'. 10. On the facts and in the circumstances of the assessee's case, the above documentary evidence as also the factual one point out to irrefutable inference and conclusion that facts of the assessee's case did not attract either clause (a) or clause (b) of section 147 of the Act and in this view of the matter, on my part, I will cancel the reassessment made in the case of the assessee as also the order of the learned first appellate authority, with consequences flowing out of above findings to follow. Since I have cancelled the reassessment made in the case of the assessee, I am not discussing the additions on merits as also the legal contentions raised before the Bench on behalf of the parties concerning merits. REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Since there is a difference of opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to rectify a mistake said to have crept in the assessment. The notice read as under: "The assessment order under section 143(3) for the assessment year 78-79 made on 22-9-78 requires to be amended as there is a mistake apparent from the record within the meaning of Section 154/155 of the Income-tax Act, 1961. The rectification of the mistake, as per details given below will have the effect of enhancing the assessment/reducing the refund/increasing your liability and if you wish to be heard, you are requested to appear in person or by an authorised representative in my office on 19-1-80 at 11-00 a.m. If, however, you intend send in a written reply to this notice and do not wish to be heard in person, you are requested ensure that your reply reaches me on or before the date mentioned above." This notice was issued sometime in January, 1980. In response to this notice the assessee replied on 19-1-1980 explaining the circumstances under which the interest was not included and also stating how it could not be included and that how the return filed without including the interest was not only proper and just but also legal. The reply given by the assessee was quoted in full in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) were that all the necessary particulars, which are material for making a proper assessment, were furnished to the Income-tax Officer at the time of filing of the return in the accompanying note, that there was no information with-held by the assessee which had a material bearing on the making of the assessment and that as per the ruling of the Supreme Court in the case of Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 for reopening of the assessment information must be received subsequent to the original assessment and as no information was received subsequent to the original assessment, the reopening of assessment under section 147 was bad in law. It was the Income-tax Officer, who on the information supplied by the assessee considered that the amount of Rs. 30,000 was not taxable and that was not due to the failure of the assessee to furnish any material fact. Therefore section 147(a) had no application at all. It was only a change of opinion on the part of the Income-tax Officer, that was responsible for the issue of notice under section 147(a), which was not permissible in law. 7. The Commissioner (A) after referring to all the facts mentioned by the assessee and after goin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer decided by applying his mind not to tax the sum of Rs. 30,000. Subsequently no information came into the possession of the Income-tax Officer whereby it could be said that the Income-tax Officer could have reason to believe that income liable to tax had escaped assessment. It was only a change in opinion. He also laid emphasis on the fact that when proceedings under section 154 failed, it could not be said there was any mistake apparent from the record and therefore there could not be any non-disclosure of any material fact by the assessee. He also referred to the claim made by the assessee for tax deducted at source and held that simply because the assessee claimed the tax deducted at source erroneously, it did not mean that there was escapement of income. In this connection he made a reference to a circular issued by the Central Board of Direct Taxes on 18-5-1965 whereunder the Board issued administrative instructions for the guidance of the Income-tax Officers and in particular advised the assessing officers to advise the assessees on matters pertaining to law. In particular it directed the Income-tax Officers not to take advantage of ignorance of the assessees as to thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cheque for Rs. 30,000 in this assessment year but encashed it in the subsequent assessment year. It is in this context that the note that accompanied the return becomes relevant. This note clearly pointed out that the interest earned was Rs. 53,700 whereas the tax deducted at source was Rs. 8,370. The note then proceeded to explain how the tax deducted at source was Rs. 8,370 when the interest earned was only Rs. 53,700 because the tax deducted at source was always 10% and calculated on the basis of 10%, the total interest should have been Rs. 83,700 as against which the assessee had shown only Rs. 53,700 leaving a balance of Rs. 30,000, which was the disputed amount. It was in respect of this disputed amount, the note explained that the difference of Rs. 30,000 came because the cheque for Rs. 30,000 towards interest from M/s Sippy Films was credited after 1-4-79 although they have issued the cheque for interest prior to 31-3-1978 and deducted 10% towards tax and deposited the same in the Reserve Bank of India and gave the certificate. In this note the assessee had clearly pointed out that the cheque of Rs. 30,000 from M/s Sippy Films was received prior to 31-3-1978, that the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax had escaped assessment. If at all there is any failure, that was the failure on the part of the Income-tax Officer to come to a proper conclusion on the basis of the facts furnished by the assessee. It is also to be noted that when the Income-tax Officer issued a notice under section 154 and subsequently dropped the proceedings, it meant that there was no mistake apparent from the record, which also meant that the non-inclusion of the sum of Rs. 30,000 in the assessment made originally was treated as a mistake apparent from the record, though later dropped. This also lends support to the view that there was no failure on the part of the assessee to disclose all material facts necessary for making a proper assessment. It is very pertinent to note that in the assessment order, the Income-tax Officer did not point out any facts, which according to him was material and which the assessee had failed to disclose. This was therefore a clear case of change of opinion, for which the provisions of section 147(a) are not available. I therefore agree with the view expressed by the learned Judicial Member and hold that the assessee had disclosed all the material facts necessary for making ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
