TaxTMI 
TaxTMI 
1982 (5) TMI 47
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.... to above, was a concern in which persons referred to in section 13(3) had a substantial interest." The ITO, after considering the material and contentions of the assessee-trusts, completed the assessments. In all the years he granted exemption under section 11 of the Act. All the assessments under section 143(3) of the Act, were completed in 1978. 4. Subsequently, the ITO on the basis of information in his possession, had reason to believe that in all these years exemption under section 11 was wrongly granted and he was of the view that in all these years the provisions of section 13(2)(h) and 13(3) read with the Explanation therein, were applicable. Accordingly, he issued a letter dated 25-9-1978 to the assessee to show cause as to why exemption granted to the assessee under section 11, at initial stage, may not be withdrawn. The letter reads as under: "On verification of the return of income for the assessment year 1976-77 filed on 26-6-1976, it has been noticed that the trust has derived interest of Rs. 12,326, on the deposits made with Karamchand Premchand (P.) Ltd. Prima facie, it is seen that in the above concern, the author, settlor, contributor, trustees and/or th....
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....recorded are as under: "The funds of the assessee-trusts are deposited/invested in Karamchand Premchand (P.) Ltd. and estates, as well as other concerns, of the Ambalal Sarabhai Group. For concerns other than Karamchand Premchand (P.) Ltd., it has been established in this group that profits earned from them are more than 20 per cent of their profits. Moreover, as admitted categorically in writing for the assessment year 1976-77, in the cases of charitable trusts of this group, i.e., Ambalal Sarabhai Group, various categories of persons referred to in section 13(3) were holding beneficially the shares of the company, viz., Karamchand Premchand (P.) Ltd. [now Shahibaug Entrepreneurs (P.) Ltd.], carrying more than 20 per cent of the voting power. Moreover, for assessment years prior to the assessment year 1975-76 also, the ITO had applied these provisions of section 13(3). Accordingly the provisions of section 13(2)(h), 13(3) and Explanations thereunder were/are applied/applicable. 2. This constitutes valid information and reason to believe that the income chargeable to tax has escaped assessment and/or has been under-assessed. Moreover, for income-tax assessments for assessment....
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....the learned AAC, the information which the ITO now claims to have possessed was available before him when the assessments were originally finalised. According to him the proceedings now initiated were only a change of opinion. He further opined that the note of the audit party cannot be a proper base for reopening the assessments. According to the learned AAC the ITO himself must have reason to believe that the income has escaped assessment. Thus, the learned AAC held that the initiation of proceedings under section 147(b) were bad in law. Consequently, he annulled all the assessments under consideration. 7. Being aggrieved with the orders of the learned AAC, the department is in appeal before the Tribunal. The learned departmental representative contended that, on the facts and in the circumstances of the cases, the learned AAC was not justified in holding that the initiation of proceedings under section 147(b) was not valid. According to him the learned AAC acted illegally while annulling the assessments. The learned departmental representative, with regard to the reasons recorded and other material available before the ITO at the time of initiation of proceedings under sectio....
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....he facts of the present case, the said decision is in favour of the department. 8. On behalf of the assessee, it was contended that a similar point was at issue before the Tribunal in the case of ITO v. Sangeet Kendra Charitable Trust, [IT Appeal Nos. 1876 to 1978 (Ahd.) of 1981] in the respect of the assessment years 1975-76 to 1977-78, vide its order dated 11-2-1982, held that the reopening of assessments under section 147(b) was bad in law. Thus, it was contended that the learned AAC was quite correct in holding that there was a change of opinion in the present cases and as such the learned AAC was quite justified in annulling the assessments. 9. I have heard the rival submissions and perused the entire material on record. 10. Before discussing the contentions of the parties, I would like to point out that the decision of the Tribunal, relied on by the assessee trusts in the present cases, will not stand in the way for deciding the present appeals on their merits. Before the Tribunal the department did not submit the reasons recorded in reopening of assessments. Under these circumstances the Tribunal decided the point against the department. In these cases, the Tribunal....
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....3(3) were holding beneficially the shares of the company, viz., Karamchand Premchand (P.) Ltd. (now Shahibaug Entrepreneurs), carrying more than 20 per cent of the voting power. Such an admission was made on 18-10-1978. A copy of the letter dated 18-10-1978, in which the said admission was made, is in the Paper Book. The original assessment orders in these years were completed before this date. Under the circumstances, the reply, dated 18-10-1978, which includes the admission could not be available to the ITO when be completed the original assessments in these years. The learned AAC, without pointing out any material, came to the conclusion that at the time of reopening of the assessment under section 147(b) all such material was before the ITO. So the factual finding given by the AAC is without any base. On the other hand, from the aforesaid discussion and the material on record, it is quite clear that the material, on the basis of which the ITO reopened the assessments under section 147(b), came in his possession only subsequently. 13. It is practically a settled law by now that two conditions must be satisfied before the ITO can act under section 147(b) or section 148. The fi....
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.... the ITO the power to reopen the assessment under section 147(b). 15. At this stage I would like to point out that in the case of Indian & Eastern Newspaper Society, the Supreme Court made it clear that although an audit party does not possess the power to pronounce on the law it nevertheless, may draw the attention of the ITO to it. Law is one thing and its communication another. In the present cases reopening of the assessment was not made merely on the objection made by the Internal Audit Party. In the reasons recorded, the ITO at first, on the basis of fresh information in his possession, had reason to believe that there was escapement of income in the present cases. After applying his mind, the ITO came to the prima facie conclusion that in the present cases the provisions of section 13(3) and 13(2)(h) are attracted and exemption under section 11 was wrongly granted at the time of the original assessments. After stating and such facts the ITO also pointed out that in the assessment years 1974-75 and 1975-76 and in wealth-tax assessments for the assessment years 1973-74 to 1975-76 the revenue audit raised objection on this point. If we read the entire reasons recorded by the....
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....nal is limited only to the subject-matter of the appeal. Thus it was contended that the Tribunal has no jurisdiction to decide the matter on merit. 20. In my opinion the contention of the assessee could hardly be accepted. Section 254(1) of the Act provides that the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon, as it thinks fit. Section 255 of the Act, deals with the procedure to be followed in appeal before the Tribunal. Sub-section (6) of the said section provides inter alia that the Tribunal shall, for the purpose of discharging its function, have all the powers which are vested in the income-tax authorities referred to in section 131, which are as regards, discovery, production of evidence, etc. Rule 11 of the Tribunal rules provides that the appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule. It reads as under: "Provided the Tribunal shall not rest its deci....