COMMISSIONER OF INCOME TAX Vs. SITADEVI N PODDAR

JUDGEMENT

(1.) THIS is an application under S. 256(2) of the IT Act, 1961, for directing the Tribunal to state a case and to refer to us for our determination, the following three questions :

(2.) THE facts giving rise to this application are as follows : The assessee is an individual. During the previous year relevant to the asst. year 1975 76, the assessee sold certain silver utensils for Rs. 4,05,959. These utensils were utensils of the type which are used in the kitchen or on the dining table as found by the Tribunal, although one must confess the weight of the utensils is somewhat staggering. The assessee had not declared details of these utensils in the original return, but she declared the same in a revised return filed before the assessment was completed. The contention of the assessee was that the aforesaid silver utensils were personal effects and were not capital assets within the meaning of the said expression in S. 2(14) of the IT Act, 1961 (referred to hereinafter as "the said Act"). The ITO concerned accepted this contention of the assessee and did not include any amount out of the sale proceeds of the said silver utensils as capital gains in the total income. Thereafter, the CIT started proceedings under S. 263(1) of the said Act on the ground that the silver utensils were not personal effects and they were capital assets on the date of the sale and, hence, the capital gain which arose to the assessee on such sale was liable to be included in the taxable income. He gave notice to the assessee that he proposed to review the orders passed by the ITO, as aforesaid. The assessee gave a reply to this notice and, after considering the reply, the CIT dropped the proceedings. Thereafter, the ITO reopened the assessment of the assessee under S. 147(b). The material part of the reasoning given by him on March 27, 1980, is that the Supreme Court in H. H. Maharaja Rana Hemant Singhji vs. CIT (1976) CTR (SC) 188 : (1976) 103 ITR 61 (SC) had held that " silver articles are not deemed to be 'effects ' meant for personal use". The ITO took the view that this information came to his knowledge subsequent to the completion of the original assessment. The assessee objected to the reopening but that objection was overruled. The ITO held that the aforesaid silver utensils were not personal effects and taxed the gain on the sale of the same in the hands of the assessee on that footing. On appeal by the assessee, the order was confirmed by the CIT (A) and the assessee appealed to the Tribunal. The Tribunal allowed the appeal and decided the matter in favour of the assessee. The Tribunal observed that it had gone through the evidence as to the nature of the articles and came to the conclusion that the said utensils sold were intended for personal use either in the kitchen or on the dining table. The very nature of the utensils was such that they could be held only for personal use. The Tribunal came to the conclusion that the said utensils were indeed personal effects held for personal use and not capital assets. It, inter alia, referred with approval to its own decision in the case of Smt. Ramdevi R. Poddar, a case in the family of the assessee herself, and pointed out that the facts in that case were more or less similar. The Tribunal further took the view that the aforesaid decision of the Supreme Court in the case of H. H. Maharaja Rana Hemant Singhji vs. CIT (supra), was based on facts which were entirely different. What was sold there was a large quantity of gold and silver coins and not silver utensils usable in the kitchen or on the dining table. The Tribunal came to the conclusion that no reasonable man reading that decision of the Supreme Court could have entertained a reasonable belief that income had escaped assessment in the present case. The Tribunal held that the reopening under S. 147(b) was not valid.

(3.) THE later observations in that judgment show that, according to the Supreme Court, what was meant by "personal effects" was an article which was intimately and commonly used by the assessee. It is, however, clear on a perusal of that judgment that it was never intended to be laid down therein that the term "personal effects" should be confined to articles, which were worn on the person of the assessee. All that was held was that the articles to be considered personal effects must be used personally by the assessee. That would be apparent from the definition of the term "capital asset referred to by the Supreme Court which clearly shows that even furniture could be said to be a movables held for personal use. In fact, even before the said decision of the Supreme Court in C. S. Poddar vs. CWT (1965) 57 ITR 207 (Bom), a Division Bench of this Court had taken a view that the expression" intended for the personal or household use "did not mean capable of being intended for personal use or household use. It meant normally, commonly and ordinarily intended for personal or household use. This decision was already before the ITO when he completed the original assessment and one fails to see how, in these circumstances, any ITO, who read the aforesaid decision of the Supreme Court, reasonably could say that he came into possession of information thereby, namely, by the decision of the Supreme Court, that gave him reason to believe that income chargeable to tax has escaped assessment in the present case. In these circumstances, in our view, the answer to the third question sought to be referred is self evident and it is in the affirmative, i.e., in favour of the assessee. Hence, there would be no purpose in directing the Tribunal to refer that question to us for determination. In view of this, questions Nos. 1 and 2 become academic and there is no point in directing the Tribunal to refer those questions.