M.V. Arunachalam vs Commissioner of Income Tax

Ramanujam, J.—The assessee seeks a direction in this reference petition to the Tribunal to refer the following question for a decision of this

court, as arising from the order of the Tribunal :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in refusing to amend its order and cancel the

assessment made u/s 147(b) of the Act ?

The assessee claimed and obtained exemption from capital gains tax under s. 54 of the I.T. Act, for the assessment year 1972-73, in the

Income Tax assessment made under s. 143(3) of the said Act on July 23, 1974. Subsequently on the ground that there was information from the

audit party that the exemption was not available to a HUF, the assessment was reopened by ITO under s. 147(b). In the reassessment made on

January 11,1978, the ITO took the view that the exemption granted under s. 54 in respect of the sale of the 20% share in the property known as

Chamundeswari Bagh"" at No. 9, Santhome High Road, has been wrongly allowed in the original assessment. He, therefore, withdrew the

exemption granted in the original assessment.

The assessee took the matter in appeal to the AAC, questioning both the jurisdiction of the ITO to make a reassessment under s. 147(b) of the

Act as well as on merits. The AAC by his order dated May 23, 1978, upheld the validity of the reassessment proceedings, following the decision

of the Supreme Court in R.K. Malhotra, ITO, Group Circle II(1), Ahmedabad Vs. Kasturbhai Lalbhai (Huf), . On merits, however, he accepted

the petitioner''s contention and directed the ITO to grant the relief under s. 54 of the Act.

The Revenue took the matter in appeal to the tribunal questioning the order of the AAC, on merits. The Tribunal dismissed the appeal filed by

the revenue by its order dated July 31, 1979, holding that the exemption under s. 54 was available to a HUF also. Aggrieved by the order of the

Tribunal the Revenue has asked for a reference to this court.

In the meantime, the Supreme Court in this case of Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New

Delhi, , held that any opinion expressed by the audit party on a question of law cannot be taken to be an information or material so as to enable the

ITO to reopen the assessment under s. 147(b) of the Act. Taking note of the subsequent decision of the Supreme Court, the assessee filed M.P.

No. 21 of 1980, before the Tribunal requesting for rehearing of the appeal so that the Tribunal may also decide the issue as regards jurisdiction,

which issue has not been decided by the Tribunal at the time of the hearing of the appeal, as there was no cross-appeal or cross-objection by the

assessee. The Tribunal, in dealing with the said M.P. No. 21 of 1980, held that no case has been made out for invoking the power of the

rectification of a mistake apparent from the record, that the jurisdiction of the ITO to reopen the assessment under s. 147(b) was not the subject-

matter of the appeal filed by the Revenue against the order of the AAC, and that there is, therefore, no question of any rectification of a mistake

arising. According to the Tribunal, the question of rectification will arise only if the Tribunal gives a decision on the point as to the jurisdiction earlier

in one way and the Supreme Court deciding that question differently later. According to the Tribunal, as it did not decided the question of

jurisdiction at any point of time, the decision of the Supreme Court in Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of

Income Tax, New Delhi, , cannot be used by the assessee as a ground for rectification of the order of the Tribunal on the ground that there was

mistake apparent from the record. In this view, the Tribunal rejected the assessee''s petitions for rectification.

Aggrieved by the order of the Tribunal refusing to rectify its earlier order dated July 31, 1979, the assessee has sought a reference on the

question set out above.

It is no doubt true that the Supreme Court in Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi,

, has taken the view that the opinion given by the audit party on a question of law cannot be used as the basis for invoking s. 147(b) of the Act for

reopening the assessment. If the Tribunal has given a decision on the question of jurisdiction of the ITO to reopen an assessment under s. 147(b) of

the Act and if the said decision of the Tribunal is contrary to the decision rendered by the Supreme Court in Indian and Eastern Newspaper

Society, New Delhi Vs. Commissioner of Income Tax, New Delhi, , then it is possible to say that there is a mistake apparent from the record of

the order of the Tribunal. But, as already stated, in this case, though the assessee in his appeal before the AAC questioned the validity of

reassessment proceedings both on the question of jurisdiction and also on merits, when the AAC upheld the jurisdiction of the ITO to reopen the

assessment, but decided the case on merits in favour of the petitioner, he did not agitate the question of jurisdiction further. Even in the appeal filed

by the Revenue against the decision of the AAC on merits, he did not raise any cross-objection questioning the jurisdiction of the ITO to reopen

the assessment under s. 147(b) of the Act, on the basis of the audit report. Therefore, there was no occasion for the Tribunal to go into the

question of jurisdiction. When the Tribunal has not given a decision on the point, we do not see how a mistake apparent from the record could

arise from the order of the Tribunal on the question of jurisdiction, merely from the fact that subsequently a decision has been rendered by the

Supreme Court on the question of jurisdiction.

The learned counsel for the assessee contends that the assessee did not question the jurisdiction issue before the Tribunal either by filing an

independent appeal or by filing a cross-objection in the appeal filed by the Revenue, in view of the fact that the decision of the Supreme Court in

R.K. Malhotra, ITO, Group Circle II(1), Ahmedabad Vs. Kasturbhai Lalbhai (Huf), , held the field and the decision of the Supreme Court in

Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi, , was rendered long after the Tribunal disposed

of the appeal on merits. Whatever be the reason for the assessee for not raising the question of jurisdiction before the Tribunal, the fact remains

that the Tribunal has not given a decision on the question of jurisdiction in its order and, therefore, there is no mistake apparent from the record so

as to enable the assessee to invoke the power of the Tribunal to rectify its order.

We are of the view that the order passed by the Tribunal in this case is proper. We are not inclined to direct a reference in this case. Hence this

petition is dismissed. No costs.