COMMISSIONER OF INCOME TAX Vs. DEVARAJULU G K

JUDGEMENT

(1.) THE assessee is a Hindu undivided family. In respect of the assessment year 1972-73, on sale of agricultural lands, it was assessed to capital gains on a sum of Rs. 2,99,500 which, on appeal to the Appellate Assistant Commissioner, was reduced to Rs. 1,30,500. On a petition filed by the assessee that it had purchased agricultural lands within two years from the date of sale, the Income-tax Officer allowed exemption from capital gains under section 54B(ii) of the Income-tax Act. 1961 (hereinafter referred to as "the Act"). On the basis of an audit objection that exemption under section 54B(ii) of the Act is available only to individual assesses and not to a Hindu undivided family, the Income-tax Officer reopened the assessment under section 147(b) of the Act and the exemption granted under section 54B(ii) of the Act was withdrawn. On appeal by the assessee, the Appellate Assistant Commissioner took the view, following the decision of the Gujarat High Court in Kashturbhai Lalbhai v. R. K. Malhotra, ITO [1971] 80 ITR 188, that an audit objection cannot constitute information with the meaning of section 147(b) of the Act and, therefore, the reopening of the assessment was not valid. However, on merits, it was held that exemption under section 54B(ii) of the Act was available not only in respect of individuals, but also in respect of Hindu undivided families. On further appeal by the Revenue before the Tribunal, the Tribunal held that the reopening of assessment under section 147(b) of the Act was valid as the decision in Kashturbhai Lalbhai's case [1971] 80 ITR 188 (Guj) was reversed by the Supreme Court in R. K. Malhotra, ITO v. Kasturbhai Lalbhai . On the question whether the expression "assessee" occurring in section 54B of the Act will take within its ambit a Hindu undivided family, the Tribunal, following the reasoning in its order in I.T.A. No. 417/Mds/1975-76 dated September 25, 1975, held that the assessee, though a Hindu undivided family, was entitled to the benefit under section 54B(ii) of the Act. That is how. At the instance of the Revenue, under section 256(1) of the Act, the following question of law has been referred to this court for its opinion :

(2.) SECTION 54B of the Act came to be inserted by section 11 of the Finance Act, 1970, with effect from April 1, 1970, and there was no corresponding provision in the Indian Income-tax Act, 1922. SECTION 54B of the Act reads as follows :