MANMOHANDAS JAGMOHANDAS (HUF) v. INCOME TAX OFFICER
[Citation -1985-LL-0311-1]

Citation 1985-LL-0311-1
Appellant Name MANMOHANDAS JAGMOHANDAS (HUF)
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 11/03/1985
Assessment Year 1960-61
Judgment View Judgment
Keyword Tags reassessment proceedings • cost of acquisition • change of opinion • interest accrued • value of land • capital loss • maharaja
Bot Summary: During the course of proceedings for this assessment, as we find from the records of the ITO, given to us in the Court the ITO directed the assessee on 23rd Oct., 1964 as per order sheet noting, to file, inter alia, balance sheet and the details of interest accounts the case was fixed for further hearing on 16th Nov., 1964 10th Feb., 1965. In the balance- sheet which was scrutinised by the ITO On 10th Feb., 1965, as recorded in the order-sheet on that date, the ITO noted that a sum of Rs. 20,929. From what is stated above, there cannot be any manner of doubt that the ITO, during the course of original assessment proceedings, applied his mind to the question of exigibility of capital gains arising out of the acquisition of the assessee s land, for which a sum of Rs. 20,929. In obtaining the approval of the Board, the ITO did not represent the facts properly. The reassessment proceedings are ab initio void for two reasons: It was merely a change of opinion by the ITO because he had considered this matter and had come to a definite conclusion, after obtaining a clarification form the assessee as contained in latter dt. CIT, in his impugned order observed that the ITO got the information regarding the acquisition of property as well as the compensation only subsequent to the completion of the original assessment. 1970-71, which, as narrated supra, clearly establishes that the ITO had, during the course of original assessment proceedings, considered the matter and come to a decision not to proceed further.


This appeal, by assessee, is directed against order of CIT (A) dt. 22nd July, 1982, relating to asst. yr. 1960-61. original assessment in this case was made on 30th March, 1985. This is assessment under s. 23 (3) of IT Act, 1922. During course of proceedings for this assessment, as we find from records of ITO, given to us in Court ITO directed assessee on 23rd Oct., 1964 as per order sheet noting, to file, inter alia, balance sheet and details of interest accounts case was fixed for further hearing on 16th Nov., 1964 10th Feb., 1965. assessee filed balance-sheet along with other details. In balance- sheet which was scrutinised by ITO On 10th Feb., 1965, as recorded in order-sheet on that date, ITO noted that sum of Rs. 20,929.60 realised from Govt., was recorded. ITO, apparently, therefore, made noting on this entry in balance-sheet for assessment year to furnish cost of acquisition or cost as on 1st Jan., 1954. Against entry, ITO also noted date 7th Dec., 1959 on which this amount had been received. Thereafter, case was adjourned to 4th March, 1966. On 4th March, 1966, assessee filed letter dt. 4th March, 1965, Photostat copy of which has been obtained and placed on our record, in which, inter alia, following submissions were made: "We are unable to give acquisition cost of this plot, because we never knew that plot belonged to us. If we take value on 1st Jan., 1954, rough face value of plot will be about Rs. 50,000, hence there is capital loss but is not claimed because litigation with Govt. is still pending. We hope above explanation will serve purpose." As noted earlier, case had been adjourned to 4th March, 1965 and on that date, hearing took place and assessment after further hearing was closed on 30th March, 1965. From what is stated above, there cannot be any manner of doubt that ITO, during course of original assessment proceedings, applied his mind to question of exigibility of capital gains arising out of acquisition of assessee s land, for which sum of Rs. 20,929.64 had been paid to assessee on 7th Dec., 1959. It has also not been controverted and has, in fact, been recorded in impugned order of ld. CIT (A), that Department did take proceedings for asst. yr. 1959-60 to bring to tax capital gains if any arising out of acquisition of these lands. However, these proceedings, when they came before CIT (A) he, vide his order dt. 14th July, 1981, in Appeal No. 20/AWJ/80-81 for asst. yr. 1959-60, after discussion at length, of various contentions, raised before him, came to conclusion that capital gains were not taxable in asst. yr. 1959-60. claim for acquisition of land had been made by assessee at Rs. 1,79,900 but, in fact, Collector, who acquired land vide his order dt. 4th Sept., 1958 paid Rs. 20,938 on 7th Dec., 1959. However, assessee m o v e d additional District Judge in reference for enhancement of compensation and Court give its judgment on 10th Dec., 1966 fixing value at Rs. 1,36,000. However, State filed appeal before High Court. High Court reduced compensation to Rs. 1,02,907 in July 1970. This was factual backdrop of case with ITO when recorded reasons on 1st Feb., 1977 with proposal to Board for reopening assessment, as if due to failure of assessee to disclose fully and truly all material facts necessary for his assessment, income in from of capital gains on acquisition of these lands had escaped assessment. In this proposal, ITO worked out escaped income by taking sum of Rs. 1,79,900 as compensation claimed by assessee and deducting therefrom amount, received from Collector on 7th Dec., 1959 and, thereby, making out case that income amounting to more than Rs. 1,00,000 had escaped assessment and it was fit case for granting approval for reassessment. This, we find, on facts, as not warranted because, on date, ITO submitted proposal to Board, assessee had accepted judgment of additional District Judge dt. 10th Dec., 1966, fixing value of land at Rs. 1,36,000. Thus, so far assessee is concerned, figure of Rs. 1,79,900 had no significance nor could it be taken by ITO for purpose of Act. Hon ble High Court of Madhya Pradesh by their judgment, given in July, 1970, had further reduced this sum of Rs. 1,36,000 to Rs. 1,02,900. No doubt, assessee had taken matter further in appeal before Supreme Court but all that could be said at this stage, at best, is that assessee could get Rs. 1,36,000 as value of land, in case judgment of High Court was reversed. Therefore, in obtaining approval of Board, ITO did not represent facts properly. Since sanction of Board was obtained on not proper representation of facts, which, in fact, tantamounts to misrepresentation of facts, sanction obtained was not in accordance with law. Therefore, reassessment proceedings are ab initio void for two reasons: (i) It was merely change of opinion by ITO because he had considered this matter and had come to definite conclusion, after obtaining clarification form assessee as contained in latter dt. 4th March, 1961 at time of original assessment proceedings. (ii) sanction, obtained by ITO from Board was not in accordance with law in view of what is stated above. ld. CIT (A), in his impugned order observed that ITO got information regarding acquisition of property as well as compensation only subsequent to completion of original assessment. This observation of his is, apparently, without consideration of material on record of ITO for asst. yr. 1970-71, which, as narrated supra, clearly establishes that ITO had, during course of original assessment proceedings, considered matter and come to decision not to proceed further. Therefore, order of CIT (A) is erroneous because reassessment proceedings were ab initio void. In arguments before us, learned counsel for assessee relied upon following judgments: (a) Govind Das & Ors. vs. ITO & Anr. 1976 CTR (SC) 192: (1976) 103 ITR 123 (SC). (b) CIT vs. Dharamchand Anand Kumar (1980) 14 CTR (MP) 421: (1981) 128 ITR 219 (MP). (c) Damodar Hansraj vs. CIT 118 ITR 999 (Cal). (d) Addl. CIT vs. New Jehangir Vakil Mills Co. Ltd. (1979) 10 CTR (Guj) 6: (1979) 117 ITR 849 (Guj) (e) Tiwari Kanhaiyalal vs. CIT 1975 CTR (SC) 78: (1975) 100 ITR 5 (SC). (f) CIT vs. His Highness Maharaja Yashwant Rao Panwar (1981) 127 ITR 650 (MP). On other hand, Revenue relied upon judgment of Supreme Court in CIT vs. T. S. P. L. P. Chidambaram Chettiar (1971) 80 ITR 467 (SC). In coming to above decision, we have carefully preused these judgments and only after giving careful thought to submissions made before us, have arrived at decision. other ground in this appeal is regarding addition of Rs. 4,925, which is interest on compensation payable. This interest is taxable in year in which decree of Court was passed, because right to receive interest accrued to assessee on date of compensation awarded by Court, in view of Madhya Pradesh High Court judgment reported in (1981) 127 ITR 650 (MP). We were not shown any other authority to contrary from this Court o r from Supreme Court. Therefore, this amount is excluded from assessment year under appeal. appeal succeeds and is allowed. *** MANMOHANDAS JAGMOHANDAS (HUF) v. INCOME TAX OFFICER
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