COMMISSIONER OF INCOME-TAX VS P. V. S. BEEDIES (PVT) LTD
1999 P T D 3809
[237 I T R 13]
[Supreme Court of India]
Present: Suhas C. Sen and S. Saghir Ahmad, JJ
COMMISSIONER OF INCOME-TAX
Versus
P. V. S. BEEDIES (PVT LTD
Civil Appeals Nos. 1564 and 1565 of 1987, decided on 01/10/1997.
Income-tax---
----Reassessment---Information--Internal audit party entitled to point out factual error or omission in assessment---Reopening of case on basis of factual error pointed out by internal audit party is permissible under law-- I.T.O. granting deduction under S.80G, Indian Income Tax Act. 1961 on account of donation to charitable trust overlooking fact that recognition granted to charitable trust had expired---Reopening was on basis of factual information given by internal audit party---Reopening of assessment valid-- Indian Income Tax Act, 1961, S.147(b).
For the assessment years 1974-75 and 1975-76, the assessment -of the assessee was completed by the Income-tax Officer by granting deduction under section 80G of the Income Tax Act, 1961, on account of donation to a charitable trust. The Income-tax Officer reopened the assessment under section 147(b) of the Act on the ground that subsequently it was pointed out by the internal audit party that the recognition which had been granted to the charitable trust had expired on September 22, 1972, and therefore, in the relevant years of account the trust was not a recognised charitable trust and that the donation made to the charitable trust did not qualify for deduction under section 80G of the Act, as a donation made to a recognised charity. The Tribunal held that the information given by the internal audit party could not be treated as information within the meaning of section 147(b) of the Act. On a reference, the High Court affirmed the order of the Tribunal. On appeal to the Supreme Court:
Held, allowing the appeal of the Department, that the internal audit party had merely pointed out a fact which had been overlooked by the Income-tax Officer in the assessment. The fact that the recognition granted to the charitable trust had expired on September 22, 1972, was not noticed by the Income-tax Officer. This was not a case of information on a question of law. The internal audit party was entitled to point out a factual error or omission in the assessment. Reopening of a case on the basis of a factual error pointed out by the audit party was permissible under law. Therefore, the reopening of the assessment was valid.
B. S. Ahuja, Ms. Sashi Kiran, C. N. Radha Krishnan and B. K. Prasad for Appellant.
JUDGMENT
These cases relate to the assessment years 1974-75 and 1975-76. The relevant accounting year ended on March 31, 1974 and March 31, 1975, respectively. Originally, the assessment was completed on June 21, 1977. There were various other proceedings which ended in the Tribunal. The Tribunal after considering all the aspects of the cases remanded the cases back to the Income-tax Officer for passing a fresh order in accordance with law. One of the points raised before the Income-tax Officer was that of justification for reopening of the assessment. It was pointed out that reopening has been done on the basis of the report made by the audit department. The contention which found favour with the Tribunal was that reopening under section 147(b) is not permissible on the basis of a report given by the audit department. This view was also taken by the High Court.
We have considered the matter. It appears that the reopening was done because in the original assessment donations made to a body known as P.V.S. Memorial Charitable Trust was held by the Income-tax Officer to be eligible for deduction under section 80G. But subsequently it was pointed out by the internal audit party that the recognition which had been granted to the P.V.S. Memorial Charitable Trust had expired on September 22, 1972. That means it had expired before April 1, 1973. Therefore, in the relevant years of account this trust was not a recognised charitable trust. In that view of the matter, the donation to P.V.S. Memorial Charitable Trust did not qualify for deduction under section 80G as a donation made to a recognised charity.
We are of the view that both the Tribunal and the High Court were in error in holding that the information given by the internal audit party could not be treated as information within the meaning of section 147(b) of the Income-tax Act. The audit party has merely pointed out a fact which has been overlooked by the Income-tax Officer in the assessment. The fact that the recognition granted, to this charitable trust had expired on September 22, 1972, was not noticed by the Income-tax Officer. This is not a case of information on a question of law. The dispute as (o whether reopening is permissible after the audit party expresses an opinion on a question of law is now being considered by a larger Bench of this Court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening of, the case on the basis of a factual error pointed out by the audit party is permissible under law. In view of that we hold that reopening of the case under section 147(b) in the facts of this case was on the basis of factual information given by the internal audit party and was valid in law. The judgment under appeal is set aside to this extent.
The appeals are allowed. There will be no order, as to costs.
M.B.A./4188/FC Appeals allowed.