TaxTMI 
TaxTMI 
1989 (2) TMI 20
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....ry tools and it had insured them against the risk of loss by fire. In April, 1967, a fire broke out in the building where the raw materials, etc., were stocked and they were destroyed which led the assessee to making a claim on the insurance company. In terms of the contract of insurance, the assessee received Rs. 11,17,270 being the replacement value of the goods lost, the value of which, according to the books of the assessee, was Rs. 10,07,996. The excess amount of Rs. 1,09,274 realised by the assessee over and above the book value of the goods lost by fire was credited by the assessee to an account styled "insurance reserve account". In the return filed by the assessee for the assessment year 1968-69 with which we are concerned in this reference, the assessee had shown this amount in Part IV. of its return. Besides, in a note appended to the return, the assessee had also disclosed the loss of goods by fire as well as the realisation of the replacement value from, the insurance company and the crediting of Rs. 1,09,274 to the insurance reserve account in the profit and loss account for the year ending December 31, 1967. While completing the assessment on February 24, 1971, the t....
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....rmation had come to the Income-tax Officer subsequent thereto leading him to a belief that the sum of Rs. 1,09,274 had escaped assessment and, consequently, the Income-tax Officer had no jurisdiction whatever to reopen the assessment under section 147(b) of the Act. In the view so taken, the Appellate Assistant Commissioner did not think it necessary to consider the question whether the sum of Rs. 1,09,274 was liable to tax or not. Accordingly, he cancelled the revised assessment. On further appeal by the Revenue before the Tribunal, it took the view that though the assessee might have disclosed the amount in Part IV of the return and no mention was made of any audit report by the Income-tax Officer in the revised order of assessment, in view of the absence in the file of the note stated to have been furnished by the assessee before the Income -tax Officer, the audit note had set out its reasons for its opinion that the amount of Rs. 1,09,274 credited by the assessee to the insurance reserve account was liable to be included in the taxable income and that led the Income-tax Officer to the belief that that amount was the income of the assessee for the assessment year in question and....
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....the foot of the profit and loss account and item No. 5 in that note related to this amount. In that note, the assessee had referred to the outbreak of fire in its factory premises and the receipt of an amount of Rs. 11,17,271 inclusive of the sum of Rs. 1,09,274 sought to be reassessed. A further note on the fire claim had also been furnished, presumably in response to some queries raised at the time of the original assessment proceedings and that had set out the details of the materials destroyed by fire, the value thereof as well as the I gross amount of the insurance claim, etc., and finally that note wound up, as could be gathered from the order of the Appellate Assistant Commissioner, as under: "The receipt represented by the amount credited to the "insurance reserve account" fulfils all the above conditions. In addition, we may state that the goods that were lost are not trading stock. In the above circumstances, the amount credited to "insurance reserve account" is correctly shown in Part IV of the income-tax return for the assessment year 1968-69." It is thus seen that with reference to this amount of Rs. 1,09,274, the assessee had placed the complete as well as the f....
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....ion 147(b) of the Act. Whether section 147(b) of the Act would at all stand attracted may now be considered. Even if there had been no omission or failure on the part of the assessee to disclose fully and completely all particulars, under section 147(b) of the Act, if the Income-tax Officer, in consequence of information in his possession, has reason to believe that income chargeable to tax has escaped assessment, he may, subject to the provisions of sections 148 to 153 of the Act, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned. The twin requisites before resort to section 147 (b) of the Act can be had are (i) the Income-tax Officer should have had or received information and (ii) such information in his possession leads him to a belief that income chargeable to tax has escaped assessment. In this case, the only justification to sustain the reopening put forth by the Tribunal is that the audit report has set out some reasons for entertaining the opinion that the surplus amount of Rs. 1,09,274 credited by the assessee to the insurance reserve account was liable to be included in the taxa....
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....ections 9 and 10 of the Indian Income-tax Act, 1922, and a different view taken afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. We are inclined to hold that, on the facts and in the circumstances of this case, this decision would squarely apply, especially when on the reference to the audit report in the order of the Tribunal, it is not possible to exclude an expression of opinion by the audit party that in law the amount was assessable. We may in this context usefully refer to the scope of the report of an internal audit party constituting information, as pointed out in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996, 1004 (SC): It is not a declaration by a body authorised to declare the law. That part alone of the note of an audit party which mentions the law which escaped the notice of the Income-tax Officer constitutes 'information' within the meaning of section 147(b) ; the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the Income-tax Officer." Finally, it was held by the Supreme Court th....