Punjab-Haryana High Court
Commissioner Of Income-Tax vs Punjab Financial Corporation on 29 July, 1987
Equivalent citations: [1990]183ITR438(P&H)
JUDGMENT H.N. Seth, C.J.
1. This application and the connected Income-tax Case No. 116 of 1, 986 under Section 256(2) of the Income-tax Act, 1961, by the Commissioner of Income-tax, in the case of the assessee, Punjab Financial Corporation, for the assessment year 1976-77, can be conveniently dealt with and disposed of by a common order.
2. The original assessment of the assessee for the assessment year 1976-77 was completed on January 15, 1977. Subsequently, proceedings to reopen the assessment under Section 147(b) of the Income-tax Act were initiated by issuing a notice under Section 148 of the Income-tax Act on February 2, 1979. According to the Assessing Officer, while completing the original assessment, he had wrongly applied a Central Board of Direct Taxes circular dated April 16, 1973, which related to bad debts and which had nothing to do with sticky loans, to interest amounting to Rs. 2,11,548, which the assessee had, in the relevant accounting year, shown in its suspense account and had thus omitted to bring the same to tax. After receipt of the notice dated February 2, 1979, the assessee filed its return on March 12, 1979, and again claimed that the interest shown by it in its suspense account was not liable to tax. It also raised an objection that the notice for reopening the assessment issued under Section 148 of the Income-tax Act was illegal inasmuch as the Assessing Officer could issue the same only on the basis of some information obtained by him after he had made the original assessment. He could not do so merely for applying his mind afresh or for correcting any error supposed to have been made in making the original assessment. The Assessing Officer, vide his order dated January 31, 1983, overruled the objection raised by the assessee and completed the assessment by adding the interest accrued on sticky loans as its income.
3. Aggrieved, the assessee went up in appeal before the Commissioner of Income-tax (Appeals) and questioned the right of the Assessing Officer to reopen the assessment. It also claimed that certain deductions and tax credits had been wrongly disallowed by the Assessing Officer. The Commissioner of Income-tax (Appeals), vide his order dated January 11, 1984, upheld the action of the Assessing Officer in reopening the assessment but granted relief to the assessee with regard to certain deductions claimed by it. He upheld the order of the Assessing Officer disallowing the tax credits claimed by the assessee. Dissatisfied, both the assessee and the Commissioner of Income-tax went up in second appeal before the Income-tax Appellate Tribunal. Whereas the appeal of the assessee was No. 251 of 1984, that filed by the Commissioner of Income-tax was No. 355 of 1984.
4. The Income-tax Appellate Tribunal, vide its order dated September 2, 1985, allowed Appeal No. 251 of 1984 holding that inasmuch as while reopening the assessment under Section 147(b) of the Income-tax Act, the Assessing Officer had no subsequent information on the basis of which he could assume jurisdiction, the entire proceedings initiated by him, vide notice issued under Section 148 of the Income-tax Act, stood vitiated. In the result, the Income-tax Appellate Tribunal allowed the appeal and annulled the assessment made in pursuance of the notice dated February 2, 1979. In the circumstances, he did not consider it necessary to express any opinion on the merits of the assessee's claim in respect of the credit for the tax deductions which had been disallowed by the Assessing Officer.
5. Inasmuch as the entire reassessment proceedings stood annulled under the order dated September 2, 1985, the Tribunal dismissed as infructuous the appeal filed by the Commissioner of Income-tax (No. 355 of 1984) whereby he had questioned the correctness of the order made by the Commissioner of Income-tax (Appeals) granting relief to the assessee in respect of certain deductions claimed by it.
6. Being dissatisfied by the orders made by the Income-tax Appellate Tribunal, the Commissioner of Income-tax made applications under Section 256(1) of the Income-tax Act in each of the two appeals requesting the Tribunal to state the case and refer the following questions of law for the opinion of the High Court:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in annulling the orders of the Inspecting Assistant Commissioner (Assessment) and Commissioner of Income-tax (Appeals) by holding that the Inspecting Assistant Commissioner (Assessment) had no jurisdiction to issue the notice under Section 148 ?"--arising out of Income-tax Appeal No. 251 of 1984.
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in dismissing the Department's appeal as infructuous ?"--arising out of Income-tax Appeal No. 355 of 1984.
The Tribunal, vide two separate orders dated March 18, 1986, rejected both the applications as, in its opinion, no referable question of law arose from the appellate order of the Tribunal in any of the two appeals disposed of by it. Thereafter, the Commissioner of Income-tax filed the present applications under Section 256(2) of the Income-tax Act praying that the Tribunal be directed to draw up the statement of the case and refer the aforementioned two questions of law arising out of Income-tax Appeals Nos. 251 of 1984 and No. 355 of 1984 for the opinion of this court (Reference Application No. 115 of 1986 pertains to Income-tax Appeal No. 365 of 1984 and Reference Application No. 116 of 1986 pertains to Income-tax Appeal No. 251 of 1984).
7. So far as the first of the aforementioned two questions is concerned, Shri Ashok Bhan, learned counsel for the Department, relied upon a decision of the Supreme Court in the case of Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287, and urged that, as held in that case, the word "information" used in Section 34(1)(b) of the Indian Income-tax Act, 1922 (a provision which corresponds to Section 147(b) of the Income-tax Act, 1961), is a word of the widest amplitude and that the section would also apply to a case where, in the original assessment, the income liable to tax had escaped assessment due to oversight, inadvertence or a mistake committed by the Income-tax Officer. He contended that, in the instant case, it was by mistake that while making the original assessment, the Income-tax Officer gave the benefit of the Central Board of Direct Taxes circular dated April 16, 1973, to the assessee in respect of the interest accrued to it on sticky loans when the said circular pertained merely to bad debts and had nothing to do with sticky loans. In the circumstances, the subsequent realisation by the Assessing Officer of the mistake committed by him ampunted to "information disclosed" as contemplated by Section 147(b) of the Income-tax Act, 1961, and the Assessing Officer had ample jurisdiction to reopen the assessment.
8. The implications of the observations in Kalyanji Mavji and Co.'s case [1976] 102 ITR 287 (SC), relied upon by learned counsel for the Department, were considered by a larger Bench of the Supreme Court in the case of Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996. In this connection, the court made the following observations at p. 1004 :
"Reliance is placed on Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC), where a Bench of two learned judges of this court observed that a case where income had escaped assessment due to the 'oversight, inadvertence or mistake' of the Income-tax Officer must fall within Section 34(1)(b) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income-tax Officer discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) and Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC) and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law."
9. In the instant case, on the Department's own showing, the Income-tax Officer had, acting upon the Central Board of Direct Taxes circular dated April 16, 1973, held that the interest accrued to the assessee on sticky loans and transferred by it to its suspense account was exempt from tax. He cannot, in view of the later pronouncements of the Supreme Court in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996, now say that the subsequent realisation by him that he had made a mistake in this regard constitutes "information" within the meaning of Section 147(b) of the Income-tax Act, 1961, thereby giving him the jurisdiction to reopen the assessee's assessment. Inasmuch as the points sought to be raised by the Revenue stand authoritatively concluded against it by a decision of the Supreme Court, it cannot be said that it gives rise to a question of law which the Tribunal can be called upon to refer for the opinion of this court.
10. Shri Ashok Bhan, learned counsel for the Department, concedes that, if no statement of the case is to be called for in respect of the first of the two questions, no such statement can be called for in respect of the second question as well. In the, result, both the applications under Section 256(2) of the Income-tax Act fail and are dismissed with costs assessed at Rs. 300 in each of the two cases.