H.N.SETH, J. - (1.) FOR the asst. yrs. 1968-69 to 1971-72, the original assessments were completed under S. 143(3) of the Act on different dates between September 1970 and December, 1971. Subsequently, the internal audit party of Kanpur, made a report dt. 23rd May, 1972, for the asst. yrs. 1968-69 to 1971-72 taking objection to the treatment of certain incomes of the assessee as capital receipts and expressing the opinion that they were revenue receipts liable to assessment to tax. On receipt of this information, the AAC looked into the records of the asst. yrs. 1968-69 as well and felt that audit objection would equally apply to the receipts of Rs. 16,554/- for the year 1968-69. He felt that this sum has escaped assessment in the year 1968-69. On or about 9th Aug., 1972, he addressed a letter to the IAC for opinion whether in view of the fact that the audit report was only for the three years 1968-69 to 1971-72, should the same be applied to the previous asst. yrs. 1968-69, and on that basis, the sum of Rs. 16,554/- be treated as revenue receipts.
(2.) IN reply, the IAC, on 22nd Sept., 1972, wrote back ; "The Corporation is charging premium to cover the cost of acquisition of land, development charges and other expenses relevant to its business activity consisting of sale of plots after development. It seems that these payments by the allottees are forfeited if the allotment is not accepted or lease deed not executed or for any other failure. The land, thereafter, is reallotted to new who are charged the same premium development charges etc. This reduces neither the cost of land to the assessee nor the new allottees get it at reduced price. The forfeited amounts therefore, are clearly profits incidental to the business activities. They are liable to be taxed as revenue receipts in the year of forfeiture. In the asst. yrs. 1968-69 to 1971-72 I find that the following amounts were forfeited but not credited to P/L A/c. Asst. yr. 1968-69 Rs. 16,554/- 1969-70 Rs. 1.01.731/- 1970-71 Rs. 58,815/- The assessee has shown these payments as reduction in cost of land in the Balance sheet. The amounts are income in the years of forfeiture. Thus, there is clear escarpment of tax. You should proceed to assess this amount as possible." Accordingly in November 1972 the ITO reopened the assessment for the aforesaid four years under S. 147 (b) of the IT Act. The assessee appeared and filed objections. They were repelled and the following additions were made in the years in question :- These amounts represent the earnest money and premiums received by the assessee in these years for defaults committed by the allottees of the land. They were added on the finding that they had escaped assessment in the original assessment. Feeling aggrieved, the assessee went up in appeal. The AAC held that it was not correct to say that the ITO reopened the assessments on information received from the IAC because on receipt of the audit objections he applied his own mind and then sought the IAC views in support of his own views. It is hence not correct that the IAC was responsible for conveying information to the ITO. Hence the views of IAC could not constitute information within the meaning of cl. (b) of S. 147 all the facts were already on the record. It was actually the ITO's own change of opinion on the admitted facts that led him, to reopen the assessment according to him, the change of opinion was on a question of law on a debatable point. He accordingly held that it cannot be said that income escaped assessment within meaning of cl. (b) of S. 147. The appeals were allowed.
(3.) THE Department went up in appeal to the Tribunal. The Tribunal held that the reopening of the assessment was caused by the information conveyed by the audit objection report. There was no administrative direction by the IAC. the audit report could constitute information within meaning of cl. (b) of S. 147. The ITO had jurisdiction to reopen the assessments. Since the question whether the receipts in question were capital or revenue in their true nature and character, was not decided by the AAC, the matter was sent back for fresh disposal.;