COMMISSIONER OF INCOME TAX Vs. K ASHOK

JUDGEMENT

(1.) AS per the direction of this Court, the Tribunal referred the following two questions for the opinion of this Court for the asst. yrs. 1970-71 and 1971-72 under s. 256(2) of the IT Act, 1961 :

(2.) THERE was an agreement of sale of certain properties. One of the conditions in the agreement was that if the entire consideration was not paid before 31st December, 1967, the purchaser should pay interest at 9 per cent per annum on the balance amount remaining unpaid on 31st December, 1967. The assessee received for these two years such interest of Rs. 7,942 for each of the two years 1970-71 and 1971-72. The assessee filed returns for the asst. yrs. 1970-71 and 1972-73 disclosing the interest income for the delayed payment as sale consideration for the purpose of making assessment towards capital gains tax. The ITO accepted the returns and completed the assessment. Later, the assessments were reopened under s. 147(b) of the Act for the reason that the interest received on belated payment of sale consideration as per the agreement on the amounts due after 31st December, 1967, was wrongly taken as part of the sale value and it should have been assessed under the head "Other sources" and not under the head "Capital gains". The assessee objected to the reopening of the assessments on the ground that the assessee had furnished all information and disclosed fully and truly all material and primary facts at the time of the original assessments, that there was no omission or failure on the part of the assessee to disclose fully and frankly all the material and primary facts necessary for the assessments and that, therefore, the reassessment proceedings initiated under s. 147(b) of the Act was on a mere change of opinion and, therefore, the reopening is bad in law. The ITO refused to accept the reasoning given by the assessee and completed the reassessments by bringing to tax the sum of Rs. 7,942 in each of the assessments under consideration under the head "Other sources". Aggrieved, the assessee filed an appeal before the AAC who confirmed the order passed by the ITO. Not satisfied with the order passed by the AAC, the assessee went in appeal to the Tribunal. The Department conceded that the reassessments were made under s. 147(b) of the Act on the basis of the internal audit report. The Tribunal following the decision of the Supreme Court in the case of Indian Newspaper Society vs. CIT (supra), held that the reassessments were not valid in law.

(3.) THUS, in the present case also, in the absence of the internal audit report, we are unable to accept the submission made by learned standing counsel for the Department that the audit report contains only pointing out of factual position and there is no pointing of any question of law that has got to be applied in this case. THUS, considering the facts arising in this case, and in the absence of any evidence on the side of the Department that the audit report contains pointing out of only the factual position, we hold that the Tribunal was correct in coming to the conclusion that the audit report forms the basis for reopening the assessment under s. 147(b) of the Act. The presumption is that the internal audit report would have contained particular pointing out of question of law that has got to be applied in this case. In that view of the matter, we see no infirmity in the order passed by the Tribunal in holding that the reassessments made under s. 147(b) of the Act are bad in law in the assessment years under consideration. In that view of the matter, we answer the questions referred to us in the affirmative and against the Department. No costs.