ASGHAR ALI MOHAMMAD ALI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) I concur in the answers proposed by my learned brother. According to the wakf deed one-fifth of the income was to be spent on religious and charitable objects described in the wakf deed. Though in the wakf deed the income from the wakf propert : at the time of the execution of the deed was stated to be Rs. 10,000 and consequently the income set apart for religious and charitable objects was said to be Rs. 2,000, there is no doubt that what the wakif intended was that one-fifth of whatever was the actual income of the year was to be spent on religious and charitable objects in that year. That was what he intended but the amount that he intended to be spent on religious and charitable objects is not the amount allowed to be exempted from the assessable income; section 4(3)(i) provides that any income derived from property held under trust or other legal obligation wholly or in part for religious or charitable purposes, in so far as it is applied or finally set apart for application èthereto, shall not be included in the total income of the person receiving it. It is, therefore, not enough that according to the trust or other legal obligation a certain income must be spent on religious or charitable purposes in order to be exempt from taxation; it must have been applied, or at least finally set apart for application, for such purposes. Now what happened in the present case is that though according to the wakf deed a certain amount (one-fifth of the actual income) was to be spent for religious and charitable purposes, the assessee applied or finally set apart for application, for such purposes, one-fifth of not the income as found to have been actually received by him, but of the income which he claimed to have received. He claimed to have received less income than he actually received.

(2.) SINCE he claimed to have received a smaller amount as income, naturally he applied, or set apart for application, for religious and charitable purposes, one-fifth of only the smaller amount. As he did not apply or set apart for application one-fifth of the actual income, one-fifth of the actual income ought not to have been deducted from the total income for assessment purposes. This Income-tax Officer ignored the provision of section 4(3)(i) and deducted from the total income one-fifth of the actual income. The result was that a larger sum than was legal was deducted from the total income, i.e., some income escaped assessment. This happened in both the assessment years in question.

(3.) IT is open to serious question whether an assessment order can be set aside on the mere ground that there was no information within the meaning of section 34(1)(b), to justify the issue of a notice under that provision. If there was no escape of income initially, the second order of assessment will fail on merits. If there was escape of income and the income is assessed under the second order after a notice served upon the assessee as required under section 34(1), I do not see any reason why the Tribunal should at all to into the question whether there had been an information to justify the issue of the notice. IT is obligatory to issue a notice and if no notice has been issued, the subsequent assessment order may be declared to be null and void. After the issue of the notice and after a finding that the income had escaped assessment, the èquestion whether there had been information in the possession of the Income-tax Officer before issuing the notice or not becomes a matter of mere academic interest. I do not know how without some kind of information an Income-tax Officer would decide to reopen the matter; ordinarily he will have some information. In a rare case he may act without information on a change of opinion or on second thought. When the reopening is done not by the Income-tax Officer who had passed the initial assessment order, but by his successor, there is no question of his acting on a change of opinion or second thought and he must have acted on information. IT is so obvious that any inquiry into the question whether he had information or not must be ruled out as a futile inquiry. IT seems to me that the object behind the requirement, that there must be information leading to the belief, is that the matter should not be reopened on mere suspicion or with the simple object of re-examining the matter. The object is fully served when after the reopening it is found as a matter of fact, that the income had escaped assessment. IT would not make much sense to set aside the correct order of assessment passed under section 34(1) on the supposed ground that the reopening was done without information.