1980 (2) TMI 266

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....pressing the opinion that they were revenue receipts liable to assessment to tax. On receipt of this information, the AAC looked into the records of the asst. yrs. 1968-69 as well and felt that audit objection would equally apply to the receipts of Rs. 16,554/- for the year 1968-69. He felt that this sum has escaped assessment in the year 1968-69. On or about 9th Aug., 1972, he addressed a letter to the IAC for opinion whether in view of the fact that the audit report was only for the three years 1968-69 to 1971-72, should the same be applied to the previous asst. yrs. 1968-69, and on that basis, the sum of Rs. 16,554/- be treated as revenue receipts. 2. In reply, the IAC, on 22nd Sept., 1972, wrote back ; "The Corporation is ch....

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....1 Rs. 58,814/- 1971-72 Rs. 1,77.100 These amounts represent the earnest money and premiums received by the assessee in these years for defaults committed by the allottees of the land. They were added on the finding that they had escaped assessment in the original assessment. 3. Feeling aggrieved, the assessee went up in appeal. The AAC held that it was not correct to say that the ITO reopened the assessments on information received from the IAC because on receipt of the audit objections he applied his own mind and then sought the IAC views in support of his own views. It is hence not correct that the IAC was responsible for conveying information to the ITO. Hence the views of IAC could not constitute information within the me....

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....tax record for that year was legal and valid ?" The facts are not in dispute. The findings are equally clear. The internal audit party of the IAC made a report for two years. It was of the opinion that on the facts of the present case the receipts were not capital in nature but were revenue, liable to tax. It was this information conveyed to the ITO by the audit report that constituted the basis for the reopening of the assessments. It has been clearly held both by the AAC as well as by the Tribunal that the letter of the IAC was in reply to the query made by the ITO. It was not an administrative direction to the ITO. It did not constitute the basis for the reopening of the assessment by the ITO. 6. In this situation, the Supreme Cour....

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.... ITO. Reserring to Kalyanji & Co. vs. CIT a decision of the Supreme Court, the Court observed that the proposition that a case where income had escaped assessment due to the oversight, inadvertence or mistake of the ITO should fall within s. 34 (1) (b) of the Act of 1972, appears to be a proposition 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 matter considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. The Court held, in our opinion, the error discovered on a reconsideration of the same material (and no mor....