COMMISSIONER OF WEALTH TAX Vs. S MUTHUKUMARASWAMY UDAYAR

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following common question for the asst. yrs. 1972-73 to 1974-75 in the case of one assessee and for the asst. yrs. 1972-73 and 1973-74 in the case of another assessee, in both WT assessment as well as IT assessment, for the opinion of this Court, under s. 256(1) of the IT Act, r/w s. 27(1) of the WT Act :"Whether, on the facts and circumstances of the case, the Tribunal is justified in holding that the reassessments made on the basis of the directions issued by the IAC of Income-tax are invalid and cannot stand in law ?"

(2.) IN the case of the assessee Sri S. Subramania Udayar, there are three appeals relating to IT assessment for the asst. yrs. 1972-73 to 1974-75, and two appeals relating to WT assessment for the years 1972-73 and 1973-74, while in the case of Sri S. Muthukumarasamy Udayar, there are only two appeals relating to WT assessments for the years 1972-73 and 1973-74. Both the assessees are Hindu undivided families (HUF) represented by their respective Karthas, Subramania Uyadar and Muthukumarasamy Udayar, who are brothers. They had moneys in a partnership firm of M/s Udayar & Co., from which they derived share income, they being represented in the firm by their respective HUF. The HUF of Subramania Udayar made gifts of Rs. 10, 000 on each day, viz., 31st Dec., 1967 and 31st Dec., 1968 to Smt. Kamalthachi, wife of S. Muthukumarasamy Uydar, the assessee's brother Rs. 5, 000 on each date 31st Dec., 1970 and 31st Dec., 1971 to minor Somasundaram, son of S. Muthukumarasami Udayar. The HUF of Sri Muthukumarsamy Udayar correspondingly gifted amounts of Rs. 10, 000 on each date 31st Dec., 1967 and 31st Dec., 1968 to Smt. Mangalathachi, wife of Subramania Udayar and Rs. 5, 000 on each date 31st Dec., 1970 and 31st Dec., 1971 to minor Palanisamy, son of Subramania Udayar. It appears that these amounts transferred to the wife and minor son of the Kartha of each HUF, were fetching interest and that this interest income relatable to each assessment year involved that has been sought to be included in the reassessments.

(3.) BEFORE us, the learned standing counsel appearing for the Department submitted that the memorandum of IAC, bearing No. EER 7/73-74, dt. 22nd Oct., 1974 merely pointed out only the law that has got to be applied in the present case. There is no interpretation of the law given by the IAC in that memorandum. Therefore, even according to the decision of the Supreme Court in cited supra, the information received by the ITO is a valid information, on which he can reopen the assessment originally made. On the other hand, the learned counsel appearing for the assessee, while supporting the order passed by the Tribunal, submitted that the IAC has no jurisdiction to instruct the ITO to reopen the assessment. Further, according to the learned counsel, the memorandum issued by the IAC contained interpretation of law by the IAC that has got to be applied in the present case. The IAC also has given a direction to reopen the assessment on the lines suggested by him. Therefore, it was submitted that the Tribunal was correct in holding that reopening was bad.