Back
High Court Of Allahabad
M.C.Agarwal, S.Rafat Alam, JJ.
M.Z. Khan
Vs.
Commissioner Of Income-Tax
Income-tax Reference 285 of 1981 and 100 of 1982
Decided on: Nov 30, 1999
INCOME TAX - Reassessment - Section 147(a) - Omission or failure to disclose material facts - Assessee, a trustee of a charitable trust, giving up right to remuneration under trust deed - Resolution passed several years prior to assessment years - Earlier assessment orders holding no taxable remuneration - Reopening of assessment under Section 147(a) not permissible - Assessee not required to disclose facts already on record and considered in earlier assessments.
Fact of the Case:
The assessee, a trustee of a charitable trust, had given up his right to remuneration under the trust deed by a resolution passed several years prior to the assessment years in question. Earlier assessment orders had held that no taxable remuneration was received by the assessee from the trust. The Assessing Officer reopened the assessment under Section 147(a) of the Income-tax Act, 1961, on the ground that the assessee had failed to disclose the material fact of his entitlement to remuneration from the trust.
Finding of the Court:
The Tribunal held that the assessee had failed to disclose fully and truly all material facts necessary for the assessment and that the reopening of the assessment under Section 147(a) was justified. The High Court reversed the Tribunal's order, holding that the assessee was not required to disclose facts that were already on record and had been considered in earlier assessments.
Issues: Whether the assessee was required to disclose facts that were already on record and had been considered in earlier assessments.
Ratio Decidendi: The High Court held that the assessee was not required to disclose facts that were already on record and had been considered in earlier assessments. The Court relied on the following principles: * Once all the primary facts are before the assessing authority, it is for him to decide what inferences of facts could reasonably be drawn and what legal inferences had ultimately to be drawn. * It is not for anybody else--far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn. * Where the Income-tax Officer had become aware of all the material facts, failure on his part to take necessary action could not result in escapement that could be attributed to any default on the part of the assessee.
Final Decision: The High Court answered the questions referred to it in the negative, holding that the Income-tax Appellate Tribunal was not justified in holding that the Income-tax Officer was justified in initiating reassessment proceedings under Section 147(a) of the Income-tax Act, 1961.
M.C. Agarwal, J.
1. THESE are references by the Income-tax Appellate Tribunal, Allahabad, made under Section 256(1) of the Income-tax Act, 1961.
2. IN Income-tax Reference No. 100 of 1982, the Tribunal has referred the following questions stated to be of law and to arise out of its order dated October 31, 1980, passed in ITA No. 1532 (Alld.) of 1975-76 for the assessment year 1964-65 :
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the Income-tax Officer was justified in initiating reassessment proceedings under Section 147(a) of the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in restoring the matter to the Appellate Assistant Commissioner to decide on merits the question of includibility of the remuneration payable to the assessee for the assessment year 1964-65 as a trustee of the Sherwani Charitable Trust ?"
In Income-tax Reference No. 285 of 1981, the following questions arising out of the Tribunal's order dated December 12, 1980, in ITA Nos. 1864, 1865 and 1866 of Allahabad of 1979 for the assessment years 1965-66, 1966-67 and 1968-69 have been referred :
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the Income-tax Officer was justified in initiating reassessment proceedings under Section 147(a) of the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in restoring the matter to the Appellate Assistant Commissioner to decide on merits the question of includibility of the remuneration payable to the assessee for the assessment years 1965-66, 1966-67 and 1968-69 as a trustee of the Sherwani Charitable Trust ?"
3. THUS, the controversy in both the references is similar. The facts of the case are that the assessee was a trustee of a trust named "Sherwani Charitable Trust". Under a clause of the trust deed, one-third of the income of the trust was to be paid to the trustees as their remuneration. The trustees had, however, by a resolution given up their right to receive the remuneration and had resolved that that part of the income of the trust be also spent on the charitable objects of the trust. The resolution was adopted several years prior to the accounting years relevant to the assessment years in question and the question of the taxability of remuneration had been agitated in some earlier years and it was held that the same was not taxable. Subsequently, the Assessing Officer of the present assessee received a communication dated March 28, 1973, from the Income-tax Officer, "A" Ward, Allahabad, that it had been held in the case of another trustee that such remuneration was taxable. On receipt of the said information, the Assessing Officer proposed to reopen the assessee's assessments under Section 147(a) of the Income-tax Act, 1961, and issued notices under Section 148 of the Act after obtaining sanction from the Commissioner of Income-tax. In pursuance of the notices under Section 148, the assessee returned the income that had originally been assessed and contended that there was no income by way of remuneration from the aforesaid trust. The Income-tax Officer did not discuss the details for his reasons to assume that there was an income by way of remuneration. In the assessment order for the assessment year 1964-65, he followed his order for the assessment year 1972-73 and in the other assessment order, he followed his order for the assessment year 1964-65. The matter was carried in appeal to the Appellate Assistant Commissioner who held that there was no failure on the part of the assessee to disclose the material facts which were already known to the Department and, therefore, the assessment could not be reopened under Section 147(a) and if at all a rea
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
