1982 (4) TMI 122 - AT - Income Tax

Tribunal upholds cancellation of reassessment order for minor sons' income share under IT Act

The Tribunal upheld the cancellation of the reassessment order initiated by the Income Tax Officer under sections 143(3) and 148 of the IT Act, 1961. The ... - Issues:Dispute over cancellation of assessment framed by ITO under s. 143(3), 148 of the IT Act, 1961 based on inclusion of minor sons' profit share in assessee's income for the period 1st Oct., 1975 to 31st March, 1976. Initiation of reassessment proceedings under s. 147(b) due to alleged escaped income. Dispute regarding the validity of reopening the assessment under s. 147(b) based on change of opinion about the interpretation of law.Analysis:The appeal before the Appellate Tribunal ITAT Chandigarh involved a dispute over the cancellation of an assessment framed by the Income Tax Officer (ITO) under sections 143(3) and 148 of the IT Act, 1961. The Assistant Commissioner of Income Tax (AAC) had cancelled the assessment, which included the minor sons' profit share in the assessee's income for the period 1st Oct., 1975 to 31st March, 1976. The ITO had issued a notice under section 148 for reassessment, alleging that income of the minors had escaped assessment due to the application of section 64 and a change in the Amendment Act. The ITO contended that the minors' profit share should have been included for the entire accounting period ending on 31st March, 1976. The assessee challenged the initiation of reassessment proceedings under section 147(b), questioning the basis for reopening the assessment.The AAC, after considering the arguments, cancelled the ITO's order of reassessment. The AAC relied on a Supreme Court decision and concluded that the ITO was not justified in reopening the case based on a change of opinion about the interpretation of the law. The Revenue disputed the AAC's decision before the Tribunal, arguing that the reassessment was not solely due to an audit objection but was an independent application of mind by the ITO. The Revenue contended that the audit's role was limited to providing information on facts, not interpreting the law.The Tribunal examined the facts and submissions from both sides. It noted that the assessee had filed the return bifurcating the income earned by the minors for specific periods. The Tribunal found that the reasons recorded for reassessment were related to an audit objection concerning the applicability of an amendment to the income of the minors. The Tribunal also considered a memo stating the share income of the minors and the potential tax demand. Based on these findings and the AAC's reasoning, the Tribunal upheld the cancellation of the reassessment order.In conclusion, the Tribunal dismissed the appeal, confirming the AAC's decision to cancel the reassessment order. The Tribunal found that the reassessment proceedings were initiated as a result of an audit objection, and the reasons provided by the AAC were deemed sufficient to support the cancellation of the reassessment.