- (1.) ON an application under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following questions for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no information was given by the audit party within the meaning of Section 147(b) of the Income-tax Act and that initiation of proceedings under that provision was wholly invalid ?" "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in quashing the reassessment order ?"
(2.) THE relevant assessment year is 1972-73. THE assessment was completed on February 21, 1975. After completion of the assessment order, the audit party has pointed out that Rs. 69,338 have wrongly been allowed as the amount of Rs. 69,338 has not been incurred against the payment of leave, salary and pension to the employees. When this information was passed on to the Income-tax Officer, he recorded the reasons for reopening of the assessment as under : "THE local audit party has raised an objection that the assessee-company has debited the profit and loss account by an amount of Rs. 69,338 for leave, salary and pension contribution. This item has been included in the amount of Rs. 13,04,367 as per the details shown in Schedule B attached to profit and loss account for the year ending September 30, 1971. THE local party is of the opinion that it is a provision for pension, contribution in respect of those employees who have since been absorbed in the company. As it is not an actual liability, it should have been added in computing the total income of the assessee-company. THE audit has further contended that such provision was disallowed for the assessment year 1973-74 by the Income-tax Officer, therefore, it should have also been disallowed for the assessment year 1972-73. I am in full agreement with the view of the audit and on the basis of the above information, I have reason to believe that income of Rs. 69,338 has escaped assessment for the assessment year 1972-73. Since the information is in my possession, action under Section 147(b) is initiated to assess the escaped income of Rs. 69,338." Notice under Section 147(b) read with Section 148 of the Income-tax Act has been issued to the assessee. After hearing the assessee, a sum of Rs. 60,569 was disallowed being the provision for pension. In appeal before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) also confirmed the view taken by the Assessing Officer. In appeal before the Tribunal, the Tribunal has taken the view that the information pointed out by the audit is not information within the meaning of Section 147(b) of the Act, therefore, the reopening is not valid and the Tribunal has allowed the appeal. While considering the submissions in para. 4, the Tribunal has given reason treating the information passed on to the Assessing Officer that it is nothing but a change of opinion, therefore, it does not constitute an information within the meaning of Section 147(b) of the Act. The relevant para. 4 of the Tribunal's order reads as under : "The Commissioner of Income-tax (Appeals) observed in the impugned orders obviously, while making the original assessment dated February 21, 1975, the Income-tax Officer proceeded on the basis that the sum of Rs. 69,338 represented an expenditure incurred by the appellant during the relevant previous year in respect of leave, salary, and pension, etc., for the employees and was an admissible deduction in computing the appellant's income from business. We do not agree with such observation of the Commissioner of Income-tax (Appeals). As appears from page 83 Schedule G of the balance-sheet, the assessee debited a sum of Rs. 69,338 under the head 'Leave, salary and pension contribution'. According to the assessee, the said sum includes the disputed provision of Rs. 60,569. No presumption arises from the said debit entry that the assessee actually incurred the expenditure of Rs. 69,338 during the year under appeal and that was allowed. Even if it is assumed for argument's sake that the assessee failed to disclose the provision in the profit and loss account and that the sum of Rs. 69,338 was debited as expenditure to the profit and loss account, the Income-tax Officer would not have allowed in the original assessment the said claim straightway. The assessee already debited the amount towards pension, etc. On these facts also, the Income-tax Officer was supposed to have made the scrutiny of the case fully whether the claim for pension was allowable. The Commissioner of Income-tax (Appeals) proceeds on the presumption that the Income-tax Officer was misled by the debit entry and that he was prevented by the misleading entry from making further scrutiny as to the character and the liability of debit. We do not approve this approach. The debit entry is not such as to enable the Income-tax Officer to presume that the claim was allowable. On these facts, it cannot be said that the Income-tax Officer was made aware about the correct position of the debit only by the audit party. As the debit is such which involves secondary inquiry about the liability in our view it is implied that the Income-tax Officer having allowed the claim, kept in view the whole balance-sheet which reflects the provision. That being so, it is clear that the Income-tax Officer was fully aware of the correct position of the provision made for pension. Thus it is not a case of valid information but of change of opinion. The matter viewed from any angle, the only conclusion to be arrived at is that no information was given by the audit party within the meaning of Section 147(b) and that initiation of proceedings under that provision was wholly invalid."
(3.) MR.Mathur submits that in case the information is regarding the facts and if audit has pointed out the factual mistake in the order, that constitutes information. He placed reliance on the decision of this court in the case of Zoraster and Co. v. CIT [1987] 163 ITR 858, the decision of the Madras High Court in the case of Smt. Indira Devi v. CIT [1994] 210 ITR 537 and the decision of the Supreme Court in the case of CIT v. P.V.S. Beedies Pvt. Ltd. [1999] 237 ITR 13. Mr.Jain, learned counsel for the assessee-respondent, submits that the audit has not pointed out any "information" within the meaning of Section 147(b) of the Act, as all material facts were before the Assessing Officer at the time of the original assessment and even the provisions made for payment of gratuity and pension to the employees is a deductible amount. He placed reliance on the decision of the Gauhati High Court on this issue as well as the decision of their Lordships in the case of Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC). The facts are not in dispute that all the basic facts required were before the Assessing Officer at the time of completion of the original assessment. The assessee-company has debited the profit and loss account by the amount of Rs. 69,338 for leave, salary and pension contribution. The break-up of that amount has also been given on account of different liabilities. If at the time of the original assessment a possible view has been taken that in case provision has been made for leave, salary and pension and in that case deduction can be allowed on such provision, actual expenses are not required or actual payment of amount against these liabilities is not required and the deduction has been allowed in the facts in this case. If other view is possible on the same set of facts that is nothing but change of opinion. ;