Commission of Income Tax vs P.P. Contractor

G.T. Nanavati, J.—The Income Tax Appellate Tribunal has referred the following six questions to this court u/s 256(1) of the Income Tax Act, 1961 :

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in coming to the conclusion that the Income Tax Officer could not have reopened the assessment u/s 147(b) of the Income Tax Act, 1961 ?

(2) Whether the Appellate Tribunal is justified in law in entertaining the application of the assessee and reviewing its own decision on appeal on the basis of a subsequent decision of the Supreme Court ?

(3) Whether the Income Tax Appellate Tribunal has any authority in law to review, rectify or reconsider any of its decisions on the basis of a subsequent pronouncement of law by the Supreme Court of India ?

(4) Whether the Supreme Court decision in the case of Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi, was rightly invoked by the Appellate Tribunal to hold that its earlier decision regarding section 147(b) proceedings based also on the Supreme Court decision in R.K. Malhotra, ITO, Group Circle II(1), Ahmedabad Vs. Kasturbhai Lalbhai (Huf), was erroneous?

(5) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that only half of the income of the residuary property of the late Shri P. P. Contractor could be taxed in the assessment of the assessee for the assessment year 1969-70 in question ?

(6) Whether, on the fact and circumstances of the case, audit note would be information so as to give jurisdiction to the Income Tax Officer u/s 147(b) of the Act ?"

Questions Nos. 1 to 5 have been referred at the instance of the Revenue and question No. 6 has been referred at the instance of the assessee.

The assessee was the sole surviving trustee of the estate of his late father, P. P. Contractor, and according to the trust deed, he was entitled to the income of trust estate. In December, 1951, the assessee executed a settlement by which he passed on one-half share of the property income from the estate of his late father to his three children. While assessing the income of the assessee for the assessment year 1969-70, the Income Tax Officer took note of this change and taxed only one-half share of the trust income in the hands of the assessee. In the earlier years also, only one-half of the income from the trust property was assessed in the hands of the assessee. The assessment order for the assessment year 1969-70 was passed on July 30, 1971. Some time thereafter, the Income Tax Officer, on the basis of an audit note, reopened the assessment for the assessment year 1969-70 and taxed the entire income of the trust property in the hands of the assessee. Therefore, the assessee preferred an appeal to the Appellate Assistant Commissioner who allowed the appeal on the ground that relevant documents were available with the Income Tax Officer at the time of the original assessment and, therefore, the audit note could not be regarded as information on the basis of which the Income Tax Officer could have reopened the assessment u/s 147(b). Aggrieved by the view taken by the Appellate Commissioner, the Revenue went in appeal to the Tribunal. Before the Tribunal, it was contended on behalf of the Revenue that the audit note could be regarded as information for the purpose of section 147(b) and, therefore, the view taken by the Appellate Assistant Commissioner was wrong. This contention was accepted by the Tribunal. It also decided on merits that only one-half of the income of the trust property could be taxed in the hands of the assessee. Thereafter, the assessee moved an application u/s 254(2) for rectification on the ground that the Supreme Court had overruled its decision in the case of R.K. Malhotra, ITO, Group Circle II(1), Ahmedabad Vs. Kasturbhai Lalbhai (Huf), on which reliance was placed by the Tribunal and requested the Tribunal to hold that the assessment was not validly reopened. The Tribunal accepted the contention raised on behalf of the assessee, granted that application and held that in view of the facts and circumstances of the case, the Income Tax Officer could not have reopened the assessment u/s 147(b). Aggrieved by both these orders, the Revenue had filed applications before the tribunal u/s 256(1) for referring the questions arising out of its orders to this court. Ultimately, by a consolidated order, the Tribunal has referred the above stated five questions at the instance of the Revenue. During the hearing of these applications, it was suggested by the assessee that question No. 6 may also be referred to this court and that is how that question has been referred.

As stated earlier, the Tribunal decided on the merits that only one-half of the income of the trust property can be taxed in the hands of the assessee. Though that finding is under challenge in this reference, now in view of the decision of this court in Commissioner of Income Tax Vs. P.P. Contractor, we need not state the facts or set out the contentions raised on behalf of the Revenue. In that decision, it has been held by this court that the assessee was within his right in executing the deed of assignment on December 6, 1951, transferring or assigning his right, title and interest in half of the income from the residuary property in favour of his children. Hence, the assessee was liable to be assessed only in respect of half of the income derived from the residuary property. Since we are taking this view on the merits of the case, all other questions become academic and they need not be answered. We, therefore, decline to answer questions Nos. 1, 2, 3, 4 and 6. Question No. 5 is answered in the affirmative, that is, against the Revenue and in favour of the assessee. Reference is disposed of accordingly. No order as to costs.