1996 (11) TMI 34 - HC - Income Tax

Court Allows Reference Application in Part, Directs Tribunal on Assessment Validity

The court allowed the reference application in part, directing the Tribunal to make a reference under section 256(2) concerning the validity of reopening ... Assessment Proceedings, Failure To Disclose Material Facts, High Court, Income From House Property, Law Applicable, Question Of Law, Reassessment Proceedings, Wealth Tax Issues Involved:1. Validity of reopening the assessment.2. Assessability of income from Samore Bagh property.3. Chargeability of interest under sections 139(8) and 217.4. Legality of a single-member bench deciding the appeal.Issue-wise Detailed Analysis:1. Validity of Reopening the Assessment:The court examined whether the Income-tax Appellate Tribunal was justified in holding that the reopening of the assessment was invalid. The original assessment for the assessment year 1980-81 was completed on January 31, 1982, but was reopened under section 147 by issuing a notice under section 148 on October 29, 1984. The assessee did not file a return in response to this notice, leading to further notices under section 142(1). The Tribunal found the reopening invalid, but the court referred to precedents such as S. Narayanappa v. CIT and Phool Chand Bajrang Lal v. ITO, emphasizing that the reasons for reopening need not be communicated to the assessee and that the sufficiency of reasons for belief is not for the court to judge. The court found substantial grounds for the first question of law.2. Assessability of Income from Samore Bagh Property:The court considered whether the income from Samore Bagh property was assessable in the hands of the assessee. The assessee claimed the property belonged to a Hindu undivided family (HUF) and was used as his residence since 1964. The Tribunal held that the income was usufruct and not taxable in the assessee's hands. The court examined the precedent in Maharaj Kumar Kamal Singh v. CIT, which dealt with similar issues of property transfer within a family. The court found the Tribunal's decision primarily a question of fact and not supported by the cited judgment, indicating that the property was not part of the common hotchpotch of the HUF at the time of transfer.3. Chargeability of Interest under Sections 139(8) and 217:The Tribunal had set aside the levy of interest under sections 139(8) and 217, referring to the Rajasthan High Court's judgment in CIT v. Multimetals Ltd., which decided against the Revenue. The court acknowledged the Tribunal's decision and found no substantial question of law to be referred.4. Legality of a Single-Member Bench Deciding the Appeal:The court examined whether the Tribunal was justified in deciding the appeal by a single-member bench despite the income determined by the Assessing Officer exceeding Rs. 1,00,000. The court referred to section 255(3) of the Income-tax Act, as it existed prior to its amendment in 1989, where the threshold was Rs. 40,000. The court found this to be a question of law and directed the Tribunal to make a reference under section 256(2) regarding this issue.Conclusion:The court allowed the reference application in part, directing the Tribunal to make a reference under section 256(2) concerning the validity of reopening the assessment and the legality of a single-member bench deciding the appeal. The matter was disposed of accordingly.