Harcharan Singh Bhatia Vs. Income-tax Officer, A-ward and anr. - Court Judgment

Ujagar Singh, J.

1. This petition arises out of the complaint filed by respondent No, 1 under Section 277 of the Income-tax Act, 1961 ('the Act' in short), against the petitioner, for having filed a return of income for the assess-ment year 1976-77, declaring his income at Rs. 31,820. The allegation is that in another firm known as Satinder Singh Sarbjit Singh, two minor sons of the petitioner, were admitted to the benefits of the partnership and both the sons had earned profits to the extent of Rs. 14,660 for that year, Objection was raised by the audit office and the assessment of income was reopened and a fresh return was filed on September 29, 1979, before respondent No. 1. In the return, profit of the minors was not disclosed. Later on, assessment of the petitioner was completed on November 15, 1979, and the petitioner's income was assessed at Rs. 47,170, after addition of the minors' profit to the original income. It was averred in the complaint that the petitioner had filed a false return of income and while filing the return, he had reasons to believe that the same was false. The petitioner was summoned, vide trial court's order dated February 13, 1982, and complainant-respondent No. 1 examined himself as PW-1 and produced Shri S. M. Sethi, Assistant Commissioner (PW.2). Thereafter, the evidence was closed and documents, exhibits PG and PH, were tendered in evidence, At the time of framing the charge, it was brought to the notice of the trial court that the order of respondent No. 1, directing the inclusion of profits of the minors in the return of the petitioner, was set aside by the Appellate Tribunal, vide its order dated July 29, 1982, wherein it was held that reassessment by the Income-tax Officer or the learned appellate authority were not in order, the relevant portion whereof is as under :

'... It is clear that the Income-tax Officer was advised by the audit party as to the view of the law that he should take by virtue of the insertion of Sub-section (1) of Section 64 by the Taxation Laws (Amendment) Act, 1975. This is contrary to the law laid down by the Hon'ble Supreme Court in the case of Indian and Eastern Newspaper Society : [1979]119ITR996(SC) . The reassessment made by the Income-tax Officer was, therefore, ab initio void. It is cancelled. Appeal allowed.'

2. In the case of Indian and Eastern Newspaper Society v. CIT : [1979]119ITR996(SC) it was held that the opinion of the internal audit partyof the Income-tax Department on a point of law cannot be regarded as 'opinion' within the meaning of Section 147(b) of the Income-tax Act, 1961. In the order dated July 29, 1982 (annexure p-3), decided by the Income-tax Appellate Tribunal, it was held that Section 64(1)(iii) of the said Act came on the statute when Sub-section (1) of Section 64 was substituted by Section 13 of the Taxation Laws (Amendment) Act, 1975, and this substituted Section was effective with effect from April 1, 1976.

3. With these observations, this complaint is not maintainable in view of the order dated July 29, 1982, passed by the Income-tax Appellate Tribunal, Chandigarh. Bench, Chandigarh, and this criminal miscellaneous petition is, therefore, allowed and the complaint and also the proceedings on that basis are quashed.