COMMISSIONER OF INCOME-TAX vs. SABARKANTHA JILLA KHARID VECHAN SANGH LTD

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ITR/4/1987HC GujaratGJHC24011737198703 September 2001Bench: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Income-tax Appellate Tribunal was right in law in holding that the reopening of assessment under Section 147(b) was not justified. The Tribunal's reasoning was that the audit had attempted to reinterpret Section 80P of the Act. The Court found that the issuance of the notice under Section 147(b) by the ITO, based on the interpretation placed by the audit, did not constitute 'information' for the purpose of Section 147(b). The Court noted that while the audit note was not on record, it was inclined to agree with the Tribunal's observation that the audit's interpretation of Section 80P could not be considered as information for reopening under Section 147(b). Therefore, the question referred to the Court was answered in the affirmative, in favour of the assessee and against the revenue. The reference was disposed of with no order as to costs.

What were the facts?

The Income Tax Officer (ITO) made an original assessment for Assessment Year (AY) 1970-71 on March 21, 1973. Subsequently, the ITO issued a notice under Section 148 of the Income Tax Act, 1961, to reopen the assessment. The reason for reopening was to withdraw the exemption granted under Section 80P(2)(iv) of the Act, as sales to members included iron and cement not intended for agricultural purposes. After hearing the assessee, the ITO revised the assessment and withdrew the exemption. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], challenging the reopening under Section 147(b) based on the Supreme Court's decision in Indian and Eastern Newspaper Society. The CIT(A) allowed the appeal on jurisdictional grounds, cancelling the assessment without addressing other grounds.

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 reopening of assessment under Section 147(b) of the Income Tax Act, 1961, was not justified? Assessee's Contention: The assessee contended that the reopening of assessment under Section 147(b) was not justified in light of the Supreme Court's decision in Indian and Eastern Newspaper Society, 119 ITR 996. This was the basis on which the CIT(A) allowed the appeal. Revenue's Contention: The Revenue contended that the Tribunal was not justified in holding in favour of the assessee. The counsel for the Revenue argued that the issuance of the notice by the ITO was on the ground that the sale in question was not for agricultural purposes, implying this should have been a valid basis for reopening.

Which sections of the Income-tax Act were involved?

Section 147(b),Section 148,Section 80P(2)(iv),Section 80P

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 4 of 1987

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH Sd/- and Hon'ble MR.JUSTICE D.A.MEHTA Sd/-

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO --------------------------------------------------------------

COMMISSIONER OF INCOME-TAX Versus SABARKANTHA JILLA KHARID VECHAN SANGH LTD

-------------------------------------------------------------- Appearance: MR BB NAYAK MANISH R BHATT for Petitioner No. 1 NOTICE SERVED for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE D.A.MEHTA

Date of decision: 14/09/2001

ORAL JUDGEMENT

(Per : MR.JUSTICE M.S.SHAH)

In this Reference at the instance of the revenue, the following question has been referred for the opinion of this Court in respect of A.Y.1970-71.

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has been right in law in holding that reopening of assessment u/s.147(b) of the I.T.Act,1961 was not justified ?"

2 The original assessment was made by Income-tax Officer on 21/3/1973. Thereafter, on scrutiny of records the I.T.O. issued notice under section 148 of the Act with a view to withdraw exemption granted u/s.80P(2)(iv) of the Act on the ground that on scrutiny of records sales to members included sales of iron and cement which were not intended for agricultural purpose. After hearing the assessee, the I.T.O. revised the assessment and withdrew the exemption granted earlier.

3 In appeal the assessee challenged the reopening of the assessment under section 147(b) of the Act in view of the decision of the Apex Court in Indian and Eastern Newspaper Society, 119 ITR 996. The C.I.T.(Appeals) allowed the appeal and cancelled the assessment on the ground of jurisdiction and therefore did not consider it necessary to deal with other grounds raised by the assessee.

4 In the appeal filed by the revenue, the Tribunal held that the audit had tried to reinterpret the provision of Section 80P of the Act and therefore issuance of notice u/s.147(b) on the basis of the interpretation placed by the audit, on which the I.T.O. relied for notice u/s.147(b), did not constitute information for the purpose of Sec.147(b) of the Act.

5 Mr.B.B.Nayak, learned Counsel for the Revenue, contended that since the issuance of notice by the I.T.O. was on the ground that the sale in question was not for agricultural purpose, the Tribunal was not justified in holding in favour of the assessee and against the revenue. The audit note is not on the record of the proceedings but in view of the specific observation in the Tribunal's order that the interpretation placed by the audit on the provisions of Sec.80P cannot constitute information for the purpose of Sec.147(b) of the Act, we are not inclined to take a different view and therefore,

we answer the question in the affirmative i.e. in favour of the assessee and against the revenue.

6 The Reference accordingly stands disposed of with no order as to costs.

Sd/- Sd/- (M.S.Shah,J) (D.A.Mehta,J)

m.m.bhatt

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