Holding

Neither Section 147(a) nor Section 147(b) applied; the reopening of the assessment was unsustainable and the appeal was dismissed.

Summary

The Commissioner of Income Tax, Shillong appealed against the order of the Income Tax Officer (ITO) who had reopened the assessment of Tarajan Tea Co. (P) Ltd. under Section 147(a) of the Income Tax Act, 1961, on the ground that a decision in another tea company case—holding that the sale of standing trees was a revenue receipt—constituted ‘information’ within Section 147. The ITO later converted the proceeding to one under Section 147(b) without issuing a fresh notice. The Appellate Assistant Commissioner set aside the reopening, the Tribunal modified that order and directed the ITO to proceed under Section 144B, and the Gauhati High Court finally set aside the re‑assessment. The Supreme Court held that neither clause (a) nor (b) of Section 147 applied because there was no omission or failure to file a return and no new information was obtained; consequently the ITO’s re‑assessment was unsustainable. The Court dismissed the appeal.

Issues considered

Whether the tribunal was justified in sustaining the reopening of assessment under Section 147(b) when neither clause (a) nor (b) of Section 147 applied.
Whether a proceeding initiated under Section 147(a) can be converted into one under Section 147(b) without a fresh notice and fresh initiation of proceedings.
Whether the tribunal was justified in setting aside the order of the Appellate Assistant Commissioner and directing the ITO to proceed under Section 144B notwithstanding the limitation bar under Section 153.

Legislation cited

Income Tax Act, 1961s. 139, s. 144B, s. 147, s. 148, s. 149, s. 150, s. 151, s. 152, s. 153

Subjects

Income Taxassessment reopeningSection 147Section 144Blimitation periodconversion of proceedingsrevenue receiptstanding trees

Judgment

'
A COMMISSIONER OF INCOME TAX, SHILLONG
v.
TARAJAN '!'EA CO. (P) LTD.

FEBRUARY 4, 1999

B [M. SRINIVASAN AND U.C. BANERJEE, JJ.]

Income Tax Act, 1961: Sectio11s 147(a) a11d (b) (As they stood before
.
-..
1.4.1989) and 139.

C Income Tax-Reassessment-Respondent-assessee-Assessment of--
No omission or failure on the part of the assessee to make a return under
Section 139 as contemplated in Sectio11 147(a}-No information obtained by
the assessing officer subsequent to Assessme11t Order-Assessment re-opened
by ITO a11d notice issued under Section 147(aj-Ground that in the case of
another Tea Company, the Appellate Assistant Commissioner had take11 the
D view that sale' of standing trees constituted revenue receipts a111i, therefore,
liable to tax-Held, neither clause (a) nor clause (b) of the Section 147would
apply in this case-The order passed by the AA.C. in another case is not ,,, ~-
'i11formation' within the mea11ing of the sectio11 147-The order of the Assess-
ing Officer re- opening the earlier order and passing a fresh assessment order
E held unsustainable.
Income T~roceedings under Section 147(a)--Conversio11 into
proceedings under Section 147(b) without issuing a fresh notice and initiation
of a fresh proceeding-Questio11 left open.

F CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1941 of
1993.
I +-.
From the Judgment and Order dated 32.92 of the Gauhati High
Court in l.T.R. No. 7 of 1986.

G Dr. V. Gauri Shankar, Rajiv Nanda, P. Parmeshwaran and B.K.
Prasad for the Appellant.

Vijay Hansaria, Sunil Kumar Jain and Ajay Kumar Gupta for the
Respondent.

H The following Order the Court was delivered :
396
C.l.T.v. TARATANTEACO.(P)LTD. 397

The three questions referred to the High Court for answer in this A
-r • y matter are as follows :
- "l. Whether on the facts and in the circumstances of the ca~e,
the tribunal having held that there was no case for re-opening the
assessment under Section 147(a) of the Income Tax Act, 1961 on
B
the reason recorded, nor any cause for re-opening of the assess-
ment under section 147(b) of the Act on the reasons recorded on
~

~ 31.3.77 was justified in law in sustaining the re- opening of assess-
ment under section 147(b) of the Act on the reasons and grounds
given in the order passed an appeal?
c
2. Whether on the facts and in the circumstances of the case,
the Tribunal was jusified in law in holding that the re-assessment
poceeding initiated under Section 147(a) of the Act by issue of
notice dated 31.12.76 under Section 148 of the.Act on the reasons
recorded, could be validly converted into a proceeding under D

- .. Section 147(b) of the Act subsequently?

3. Whether on the facts and in the circumstances of the case
the Tribunal was justified in law in setting aside the order of the
Appellate Assistant Commissioner of Income Tax cancelling the
E
re-assessment orders p~sed by the Income Tax Officer in ig-
norance of Section 144-B of the Act and in directing the Income
Tax Officer to resort to the provisions of Section 144-B afresh
inste~d of annuling and/or cancelling the re-assessment orders and
without also taking into consideration the legal bar of limitation
for the passing of re-assessment orders under Section 153 of the F
Act?"
_..4.
I

2. The short facts which gave rise to that reference were that the
respondent-assessee was duly assessed by the Income Tax Officer (I.T.O.)
for the relevant period on the basis of the information supplied by the G
assessee. No particulars were left out by the assessee for enabling the
completion of his assessment. However, the I.T.O. re-opened the assess-
~ ment and issued a notice under Section 147(a) of the Income Tax Act on
the basis that in the case of another Tea Company, the Appellate Assistant
Commissioner had taken the view that sale of standing trees constituted H
398 SUPREME COURT REPORTS [1999] 1 S.C.R. ·

A revenue receipts and, therefore, liable to tax. The I.T.O. was of the opinion
that the decision of the Appellate Assistant Commissioner in the other case
would amount to 'information' within the meaning of Section 147(a) of the
Act in so far as the assessee-company is concerned.

3. In the course of the proceedings under Section 147(a), the l.T.O.
B found that it could not be sustained under that sub- section and converted
the same into a proceeding under Section 147(b) and concluded the matter.
~
The order of the I.T.O. was challenged before the Appellate Assistant
~
Commissioner (A.A.C) who set aside the same. But on further appeal by
the Revenue, the Tribunal modified the order of the A.A.C. and permitted
c the I.T.O. proceed afresh under Section 144B of the Act. When the matter
came before the High Court, the reference was answered in favour of the
assessee and the order passed by the I.T.O. on re- assessment was set aside.
In fact, the High Court observed that the Tribunal ought to have quashed
the order converting the proceedings under Section 147(b) from that under
Section 147(a).
D
4. On perusal of the records, we find that neither Section 147(a) nor
Section 147(b) would apply in this case. The said Section at the relevant )<-
period (and prior to Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1.4.1989) read as follows :
E "If -

(a) the Assessing Officer has reason to believe that, by reason
of the omission or failure on the part of an assessee to make a
return under Section 139 for any assessment year to the Assessing
F Officer or to disclose fully and truly all material facts necessary

,-
for his assessment for that year, income chargeable to tax has
escaped assessment for that year, or +,~

(b) notwithstanding that there has been no omission or failure
as mentioned in clause (a) on the part of the assessee, the Assess-
G ing Officer has in consequence of information in his possession
reason to believe that income chargeable to tax has escaped
assessment for any assessment year, "
~

he may, subject to the provisions of Ss. 148 to 153, assess or reassess
H such income or recompute the loss or the depreciation allowance,
C.l.T. V. TARAJAN TEA co. (P) LTD. 399
... • y
as the case may be, for the assessment year concerned (hereinafter A
~ in sections 148 to 153 referred to as the relevant assessment year).

5. A perusal of the record in this case shows that there was no
omission or failure on the part of the assessee to make a return under
Section 139 as contemplated in clause (a); nor was there any information
in the possession of the Assessing Officer obtained by him subsequent to B
-··,_. the assessment order. Whatever information was necessary was already
'-._

available to the Assessing Officer when the first assessment was made. T-Oe
order passed by the A.AC. in another case is not 'information' within the
meaning of the Section. Hence, neither clause (a) nor clause (b) of the
Section would apply in this case. c
6. In the circumstances, it' is unnecessary for us to consider the
question whether a proceeding under Section 147(a) could be converted
into a proceeding under Section 147(b) in the course of th~ proceedings
without issuing a fresh notice and initiation of a fresh proceeding. Without
deciding that question, we come to the conclusion in this case that the D
~ .,. order of the Assessing Officer re-opening the earlier order and passing a
fresh assessment order is unsustainable and the view taken by the revenue
authorities has been rightly set aside by the High Court.

7. The appeal fails and is dismissed. No costs.
E
T.N.A. Appeal dismissed.