COMMISSIONER OF INCOME TAX Vs. PANKAJKUMAR R SHAH

JUDGEMENT

(1.) THE CIT (Gujarat III), Ahmedabad, has filed this application seeking answer on the following two questions :

(2.) FROM the record it transpires that for the asst. year 1975 76, AO assessing the income of the assessee under S. 143(1) of the IT Act, 1961 (hereinafter referred to as the 'Act'), by an order dt. 15th Nov., 1976, determined total income of the assessee at Rs. 4,660. On or about 23rd Dec., 1978, notice under S. 148 of the Act was issued, which was served on the assessee on 3rd Jan., 1979. The AO by order dt. 31st March, 1980, determined the total income of Rs. 91,844. It appears that the AO was of the view that the income earned by the assessee by way of capital gain has escaped the assessment. He was of the view that transfer of 700 shares of Arvind Mills as stock in trade to the partnership firm styled as M/s Shah Traders in which the assessee was a partner would amount to transfer of shares and would attract the provisions of the Act. The AO considering the market rate, cost of acquisition and permissible deduction held that the assessee was required to pay tax of capital gain of Rs. 87,140. The aforesaid order was challenged before the AAC who allowed the appeal preferred by the assessee. The Revenue carried the matter before the Tribunal contending that the AAC was not justified in holding that initiation of proceedings under S. 147 were ab initio void.

(3.) THE audit party drew the attention of the AO to the fact that the transfer of shares of Arvind Mills by the assessee would amount to relinquishing the right over the property and that would amount to transfer within the meaning of S. 2(47) of the Act. Thus, the audit party merely invited ITO's attention to the legal position and had not expressed any legal opinion. It may be stated at this stage that the facts were stated in the return. Taking into consideration the binding instructions of the CIT, the audit party pointed out to the AO the nature of instructions. However, the same would not amount to information from external source and would not confer any jurisdiction on the AO to reopen the assessment which was already closed. Existing instructions were brought to the notice of the ITO would not constitute information as to the facts which would be permissible in accordance with the principles laid down by the apex Court to reopen the assessment. It is clear from the facts that the AO has not traced any fresh information which would enable him to reopen the assessment. The audit party was not competent to pronounce the judgment on the legal implication of the transaction. The audit party was not clothed with the jurisdiction to pronounce the judgment and as the facts were very much before the ITO, it cannot be said that new facts were unearthed by the AO. Sec. 147(b) of the Act would authorise the AO to reopen the assessment. Sec. 147(a) and (b) as applicable reads as under :