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Commissioner of Income-tax, Bombay City-viii Vs. Sitadevi N. Poddar - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Application No. 175 of 1983
Judge
Reported in(1984)41CTR(Bom)179; [1984]148ITR506(Bom); [1984]17TAXMAN345(Bom)
ActsIncome Tax Act, 1961 - Sections 2(14), 45, 147, 256(2) and 263(1)
AppellantCommissioner of Income-tax, Bombay City-viii
RespondentSitadevi N. Poddar
Excerpt:
.....256 (2) and 263 (1) of income tax act, 1961 - whether tribunal was justified in holding that provisions of section 147 (b) are not applicable for assessment - only those effects can legitimately be said to be personal which pertains to assessee's person - an intimate connection between effects and person of assessee must be shown to exist to render them personal effect - articles to be considered personal effects must be used personally by assessee - held, section 147 (b) not applicable for assessment. - - in the case of h h maharaja rana hemant singhji's case [1976]103itr61(sc) ,what had been sold was a very large quantity of gold sovereign and old silver-rupee coins as well as silver bars. 7. that would be apparent from the definition of the term 'capital assets' referred to by..........and in the circumstances of the case, there was any evidence before the tribunal to hold that the silver utensils sold by the assessee were not capital assets within the meaning of section 2(14) of the income-tax act, 1961 ?(2) whether, on the facts and in the circumstances of the case, the tribunal was right in law in holding that the profits received on sale of silver utensils were not liable to capital gains tax under section 45 of the income-tax act, 1961, for the assessment year 1975-76 ?(3) whether, on the fact and in the circumstances of the case, the tribunal was justified in law in holding that the provisions of section 147(b) of the income-tax act, 1961 are not applicable for assessment for assessment year 1975-76 ?'2. the facts giving rise to this application ar as follows :.....
Judgment:

Kania, J.

1. This is an application under s. 256(2) of the I.T. Act, 1961, for directing the Income-tax Appellate Tribunal to state a case and to refer to us for our determination, the following three question :

'(1) Whether, on the facts and in the circumstances of the case, there was any evidence before the Tribunal to hold that the silver utensils sold by the assessee were not capital assets within the meaning of section 2(14) of the Income-tax Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the profits received on sale of silver utensils were not liable to capital gains tax under section 45 of the Income-tax Act, 1961, for the assessment year 1975-76 ?

(3) Whether, on the fact and in the circumstances of the case, the Tribunal was justified in law in holding that the provisions of section 147(b) of the Income-tax Act, 1961 are not applicable for assessment for assessment year 1975-76 ?'

2. The facts giving rise to this application ar as follows : The assessee is an individual. During the previous year relevant to the assessment year 1975-76, the assessee sold certain silver utensils for Rs. 4,05,959. These utensils were utensils of the type which are used in the kitchen or on the dining table as found by the Tribunal, although one must confess the weight of the utensils is somewhat staggering. The assessee had not declared details of these utensils in the original return, but she declared the same in a revised return filed before the assessment was completed. The contention of the assessee was that the aforesaid silver utensils were personal effects and were not capital assets within the making of the said expression in s. 2(14) of the I.T.Act, 1961, (referred to hereinafter as 'the said Act'). The ITO concerned accepted this contention of the assessee and did not include any amount out of the sale proceeds of the said silver utensils as capital gains in the total income.

3. Thereafter, the Commissioner of Income-tax started proceedings under s. 263(1) of the said Act on the ground that the silver utensils were not personal effects and they were capital assets on the date of the sale and, hence, the capital gain which arose to the assessee on such sale was liable to be included in the taxable income. He gave notice to the assessee that he proposed to review the orders passed by the ITO, as aforesaid. The assessee gave a reply to this notice and, after considering the reply, the Commissioner dropped the proceedings. Thereafter, the ITO reopened the assessment of the assessee under s. 147(b). The material part of the reasoning given by him on March 27, 1980, is that the Supreme Court in H H Maharaja Rana Hemant Singhji v. CIT : [1976]103ITR61(SC) had held that 'silver articles are not deemed to be `effects' meant for personal use.' The ITO took the view that this information came to his knowledge subsequent to the completion of the original assessment. The assessee objected to the reopening but that objection was overruled. The ITO held that the aforesaid silver utensils were not personal effects and taxed the gain on the sale of the same in the hands of the assessee on that footing. On appeal by the assessee, the order was confirmed by the Commissioner (Appeals) and the assessee appealed to the Tribunal. The Tribunal allowed the appeal and decided that the matter in favor of the assessee. The Tribunal observed that it had gone through the evidence as to the nature of the articles and came to the conclusion that the said utensils sold were intended for personal use either in the kitchen or on the dining table. The very nature of the utensils was such that they could be held only for personal use. The Tribunal came to the conclusion that the said utensils were indeed personal effects held for personal use and not capital assets. It, inter all, referred with approval to its own decision in the case of Smt. Ramdevi R. Poddar, a case in the family of the assessee herself, and pointed out that the facts in that case were more less similar.

4. The Tribunal further took the view that the aforesaid decision of the Supreme Court in the case of H H Maharaja Rana Hemant Singhji v. CIT : [1976]103ITR61(SC) , was based on facts which were entirely different. What was sold there was a large quantity of gold and silver coins and not silver utensils usable in the kitchen or on the dining table. The Tribunal came to the conclusion that no reasonable man reading that decision of the Supreme Court could have entertained a reasonable belief that income had escaped assessment in the present case. The Tribunal held that the reopening under s. 147(b) was not valid.

5. We propose to consider first whether the answer to question No. 3, which deals with the reopening of the assessment, can be considered as self-evident or not. In the case of H H Maharaja Rana Hemant Singhji's case : [1976]103ITR61(SC) , what had been sold was a very large quantity of gold sovereign and old silver-rupee coins as well as silver bars. The observations of the Supreme Court in that case have to be read in the light of those facts. That judgment dealt with the construction of the term 'capital assets' as used in s. 2(4A), of the Indian Act, 1922. The Supreme Court observed, inter alia, as follows (p. 64) :

'A close scrutiny of the context in which the expression occurs shows that only those effects can legitimately be said to be personal which pertains to the assessee's persons. In other words, an intimate connection between the effects and the person of the assessee must be shown to exist to render them `personal effects'.'

6. The later observations in that judgment show that, according to the Supreme Court, what was meant by 'personal effects' was an article which was intimately and commonly used by the assessee. It is, however, clear on a perusal of that judgment that it was never intended to be laid down therein that the term 'personal effects' should be confined to articles, which were worn on the person of the assessee. All that was held was that the articles to be considered personal effects must be used personally by the assessee.

7. That would be apparent from the definition of the term 'capital assets' referred to by the Supreme Court which clearly shows that even furniture could be said to be a movable held for personal use. In fact, even before the said decision of the Supreme Court in G S Poddar v. CWT : [1965]57ITR207(Bom) , a Division Bench of this court had taken a view that the expression 'intended for the personal or household use' did not mean capable of being intended for personal use or household use. It meant normally, commonly and ordinarily intended for personal or household use. This decision was already before the ITO when he completed the original assessment and one fails to see how, in these circumstances, any ITO, who read the aforesaid decision of the Supreme Court, reasonably could say that he came into possession of information thereby, namely, by the decision of the Supreme Court, that gave him reason to believe that income chargeable to tax has escaped assessment in the present case. In these circumstances, in our view, the answer to the third question sought to be referred is self-evident and it is in the affirmative, i.e., in favor of the assessee. Hence, there would be no purpose in directing the Tribunal to refer that question to us for determination. In view of this, question Nos. 1 and 2 become academic and there is no point in directing the Tribunal to refer those questions.

8. In the result, the rule is discharged with costs.


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