COMMISSIONER OF INCOME-TAX vs. RAMDAS N DESAI

ITR/134/1983HC GujaratGJHC24011606198306 September 1996Author: HONOURABLE MR. JUSTICE N.J.PANDYA,HONOURABLE MR. JUSTICE S.D.PANDIT6 pages
AI SummaryAllowed

What were the facts?

The assessee, Ramdas N Desai, was assessed for AY 1967-68. The Income-Tax Officer (ITO) initially passed an assessment order on 13.11.1967, not treating an amount of Rs. 1,60,000 received by the assessee as liable to capital gains. Subsequently, on or about 6.8.1969, the Senior Auditor informed the ITO that capital gains of Rs. 1,36,635 had escaped assessment, leading to a short levy of tax of Rs. 20,495. The ITO then initiated action under Section 147(b) of the Income-Tax Act, 1961, and passed an order assessing capital gains of Rs. 13,635. The assessee appealed to the CIT(Appeals), who rejected the appeal on 6.9.1978. The assessee then appealed to the Income-Tax Appellate Tribunal (ITAT), which allowed the appeal on 18.9.1979, holding that the ITO had not received any factual information justifying the action under Section 147(b). The ITAT has referred a question of law to the High Court at the instance of the revenue.

What did the High Court hold?

The High Court held that the Income-Tax Appellate Tribunal was correct in its view. The Court reasoned that the original assessment order did not record any mistake in the application of law or any inadvertence by the ITO. The CIT's order also acknowledged that the assessee had filed all the necessary details of the property transfer. The Court relied on the Supreme Court's decision in Indian and Eastern Newspaper Society vs. CIT (119 ITR 996), which held that the opinion of the audit party on a point of law cannot be regarded as "information" enabling the ITO to initiate reassessment proceedings under Section 147(b) if the ITO had already considered the relevant provisions. A mere change of opinion or discovery of an error on reconsideration of the same material does not grant the power to reopen the assessment. The Court found that the auditor's information did not provide new factual information that the ITO did not already have. Therefore, the action under Section 147(b) was unjustified. The question referred to the Court was answered in the affirmative, against the revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal was right in law in holding that the Income-Tax Officer did not receive any factual information from the auditor which he did not have, and therefore, the action under Section 147(b) was unjustified? (Question of law turning on Section 147(b) of the Income-Tax Act, 1961). Assessee's Contentions (as inferred from the judgment): The assessee contended that the amount in question could not be treated as capital gain. The judgment implies that all material facts were placed before the ITO during the original assessment, and the ITO did not record any mistake in the application of law or inadvertence in his original order. The CIT's order also noted that the assessee had filed all details of the property transfer. The ITAT's finding suggests that the information from the auditor did not constitute new factual information that the ITO did not already possess. Revenue's Contentions (as inferred from the judgment): The revenue relied on the information received from the auditor to justify the action under Section 147(b). The revenue cited R.K. Malhotra vs. Kasturbhai Lalbhai (109 ITR 537) and CIT vs. A.L.A. Firm (189 ITR 285). The revenue's argument implicitly suggests that the auditor's information provided a basis for reassessment under Section 147(b) due to escaped assessment.

Which sections of the Income-tax Act were involved?

Section 147(b)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 134 of 1983

For Approval and Signature:

Hon'ble MR.JUSTICE N.J.PANDYA and

Hon'ble MR.JUSTICE S.D.PANDIT ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements? yes. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

2.

To be referred to the Reporter or not? yes.

3.

Whether Their Lordships wish to see the fair copy of the judgement? No 4. Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? No.

5.

Whether

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 147(b)

All 27 judgments and leading authorities on Section 147(b) →

Recent GST High Court judgments

Search GST case law →