TaxTMI 
TaxTMI 
1986 (5) TMI 68
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....y Trust 2,06,810 by invoking the provisions of sub section [4] of section 21. The assessee appealed against the aforesaid orders to the commissioner [Appeals] challenging [1] the validity of the reopening of the assessment, and [2] the quantum of wealth determined. 3. The commissioner has not accepted the assessee's appeals. The present appeals have, therefore, been filed by the assesses before the Tribunal against the orders of the Commissioner [Appeals]. 4. To appreciate the reasoning on which the grievance of the assessee is based, it would be appropriate at this stage to note the facts of the cases first. We will mention the facts of Anurag Dalmia Family Trust first. Shri Vishnu Hari Dalmia created the trust known as 'Anurag Dalmia Family Trust' vide trust deed dated6-6-1964. Shri Jaidayal Dalmia Shri Parmeshwar Prasad Bogla and Shri Jagdish Prasad Poddar were appointed trustees vide this trust deed. The settlor transferred to the aforesaid trustees 70 per cent shares of Hari Bros. [P.] Ltd., Scindia House,New Delhiand directed the trustees vide clause 2 of the trust deed to divide the trust fund into two moe....
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....from the date hereof, the said Part B of the trust fund or any part thereof shall beamed over in such proportion as the trustees may decide to the said child or children, as the case may be, at any time between the birth of the first child and the completion of 18 years for the date hereof, at the discretion of the trustees; but if the said Part B of the trust fund has not been made over to any child of the said Anurag Dalmia as aforesaid and no child of the said Anurag Dalmia is in existence at the expiry of 18 years from the date hereof, the said Part B of the trust fund shall be made over to the wife of Anurag Dalmia at the expiry of 18 years from the date hereof or on the death of the said Anurag Dalmia if he dies childless before the expiry of 18 years from the date hereof; and if no wife of the said Anurag Dalmia be living at the expiry of 18 years from the date hereof the said part B of the trust fund shall be disposed of in accordance with the provisions of sub-paragraph [ii] below. A child on ventra so mere if and when born shall be deemed to be a child in existence for the purposes of this deed; [ii] if the said Anurag Dalmia dies unmarried within a period of 18 years ....
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....B of the fund shall be accumulated." 5. In the of Parag Dalmia Family Trust, the facts are as below : The Trust deed was made on12-6-1964. The settlor of this trust was Shri Nar Hari Dalmia son of Shri Jaidayal Dalmia and the following person were the trustees : 1. Shri Jaidayal Dalmia. 2. Smt. Aruna Dalmia. 3. Shri Ghanshyam Kejriwal. 100 full paid ordinary shares of Rs. 100 each of Hari Bros. [P.] Ltd. were the trust property which were settled on trustees by the settler. Vide clause 2 of the deed, the trustees were directed to divide the trust fund into two moieties, referred to as Part A and Part B of the trust fund, as in the case of Anurag Dalmia Family Trust. Part A of the trust fund vide clause 3 of the trust deed was to be distributed and/or applied by the trustees at the close of the trust period in the manner provided in clause 4 and the said clause 4 reads as below : "The said Part A of The trust fund shall be settled and disposed of by the trustees at the close of the trust period as defined in paragraph 3 above in the manner following namely : [i] if the said Parag Dalmia marries within 18 years from the date here of the said part A of the trus....
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....n on his death; or, if he does not marry till the completion of 18 years from the date of this deed, then on the completion of 18 years from the date of this deed, the said Part B of the trust fund shall be settled and disposed of absolutely by the trustees or following persons and purposes in such proportion as the trustees think proper. 'All the children of Archana Dalmia [sister of Parag Dalmia] all the children of the brothers of the settlor; who my be in existence on the said date, and for any religious purposes or charitable purposes as relief of the poor, education, medical relief and advancement of any other object of general public utility.'". Clauses 7 and 8 of the trust deed provided for the disposal of the income of the trust fund during the trust period and the same read as below : "7 During the trust period as defined in paragraph 3 above in respect of the said Part A of the trust fund, or any part thereof may until it is finally vested in accordance with the provisions of paragraph 3 and 4 above, be applied at the discretion of the trustees, for all or any of the following purposes, namely, the benefit maintenance, health, recreation or education of or for m....
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.... to moieties A and B separately and the computation has been done after claiming exemption under section 5[1A] in respect of shares to the extent of Rs. 1,11,064. Along with the return a balance sheet of the trust was, however, filed where on the liabilities side, there is reference to trust fund Part A and to trust fund Part B. From a perusal of the assessment order originally made by the WTO, it appears that the said assessment was completed by the WTO exception the assessee's returned wealth and, there is no reference in the body of the assessment order to the various clauses of the trust deed and two parts of the trust fund as noted above. 9. It appears that some time after the assessments had been completed as above, internal audit party audited the assessments made and they pointed had not been taken of the various provisions of the trust deed and of the fact that the shares of the beneficiaries in the trust in question were indeterminate. On receipt of the said audit notes, the WTO appears to have examined his re cord once again and after being convinced that what was being pointed out to him was correct, he initiated proceedings under section 17[1] [b] against both the t....
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....O CCXI." The assessee challenged the correctness of the initiation of proceedings and pointed out that the information received from the audit could not be regarded as information in accordance with the decision of the Hon'ble Supreme Court in the case of Indian and Eastern Newspaper society v. CIT [1979] 119 ITR 996. It was also pointed out in the reassessment proceedings before the WTO that Part A of the trust fund was to be absolutely settled on the wife of Shri Anurag Dalmia and Parag Dalmia respectively and that in case of Shri Anurag Dalmia or Parag Dalmia not marrying or dying unmarried, trust fund was to be handed over to the children of Shri Sanjay Dalmia and Archana Dalmia and, therefore, it could not be said with regard to part A that the interests of the beneficiaries were indeterminate. Even in the case of Part B it was stated that the amount was to be applied for the children of Shri Anurag Dalmia, Shri Parag Dalmia and so, it could to be said that the shares were not determinate. It was, therefore, urged that the original assessments as completed were correct. The above submissions of the assessee were, however, not accepted by the WTO, assessee thereupon appealed....
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....law to the WTO and the WTO had erred in initiating proceedings under section 17[1] [b] on the basis of the report of the audit. According to the learned counsel for the assessee, the trust deed was very much on record and it would be in corrected to presume that the learned WTO had not gone through the trust deed before completing the assessments in question. Once he completed the assessments on the basis of the returned wealth after examining the trust deed, he had formed his opinion about the assessee's assessability and it would be mere change of opinion. The orders of the WTO were clearly bad and were directly hit by the ratio of Indian and Eastern Newspaper Society case. 12. On behalf of the revenue, the above submissions were opposed and it was pointed out that the revenue audit merely conveyed the information to the WTO with regard to the various provision of the trust deed and they were not the source of any information of law to the WTO. The law was contained in sub-section (4) of section.21 itself and by merely pointing out to the provisions of sub-section (4) of section 21 it could not be said that the revenue audit had propounded any proposition of law which was trea....
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....elevant that the trust deeds were on the record of the WTO, nor is it relevant that the assesses had filed balance sheets of the trust wherein part A and part B of the trust funds had been separately demarcated. Mere demarcation of the trust funds into part A and B would not bring to the knowledge of the WTO that part A was determinate and part B was indeterminate. That knowledge could have been gathered by him only if he had cared to read the relevant provisions of the trust deed which he did not do while finalising the original assessment orders. His failure to do so would not as per the above observations of their Lordships of the Hon'ble Supreme Court bar jurisdiction for action under section 147 (1) (b) which is analogous to the provisions of section 17(1) (b). Even in the case of Indian & Eastern Newspaper Society, their lordships have acknowledged this position. This is what their Lordships observed : "But although an audit party does not possess the power to so pronounce on the law, it nevertheless may draw the attention of the ITO to it. Law is one thing, and its communication another. If the distinction between the source of the law and the communicator of the law is c....