1. This reference had reached earlier before us on September 3, 1984. On that day, we suggested to the learned counsel for the Commissioner that additional material was required to be tendered, and in pursuance of our suggestion, a compilation has been tendered to us which has been taken on record by consent.
2. In this reference as many as six questions stand referred to us by the Income-tax Appellate Tribunal, namely :
'(1) Whether, on the facts and in the circumstances of the case, the decision of the Appellate Assistant Commissioner regarding the proper construction of section 280U of the Income-tax,Act, 1961,was 'information' within the meaning of the term as used in section 147(b) of the said Act ?
(2) Whether, on the facts and in circumstances of the case,the Income-tax Officer validity initiated and completed reassessment under section 147(b) of the Income-tax Act, 1961 ?
(3) Whether law prescribes any period of limitation for making additional deposit under section 280U of the Income-tax Act, 1961 ?
(4) Whether, on the facts and in circumstances of the case, the assessee validity made the additional deposit and was entitled to the deduction in regard thereto ?
(5) If so, whether the additional deposit could be said to have been made within time ?
(6) Whether, in any event, the additional deposit of Rs. 25,000 can be said to have been validity made ?'
3. A few facts may be stated. The assessee is a well-known dancer and an artist working in the cinema industry. The ITO had served on the assessee a notice under s. 280F of the I.T. Act, 1961,demanding payment of a advance annuity deposit, which amount was based on her last completed assessment. On June 1, 1964, the assessee filed her own estimate of advance annuity deposit payable by her under s. 280H of the said Act, which was based on an estimated income of Rs. 1,00,000. the advance annuity deposit amount was estimated income of Rs. 37,5000. This was composed of two separate items, Rs. 12,500 represented the compulsory part of the annuity deposit payable by her at 12 1/2% and Rs. 25,000 represented the optional part of the annuity deposit, which could be paid by her under s. 280U of the said Act. The assessee deposited Rs. 9,400 on December 10, 1964, and the balance of Rs. 28,100 on January 29, 1965.
4. On August 31, 1968, the ITO made a regular assessment of the assessee for the year under question on a total income of Rs. 2,61,459. This consisted of property income of Rs. 11,718 and professional income of Rs. 2,49,741. The annuity deposit (both compulsory and optional) was calculated by the ITO at Rs. 95,120. He deducted the said amount from the assessee's professional income and computed the tax payable by her at Rs. 19,490. On December 5, 1968, the ITO issued a notice demanding the balance amount of annuity deposit, namely, Rs. 57,620, and this was sent along with the demand notice for the payment of tax as determined by the ITO. We are informed that the assessee immediately paid the balance amount of annuity deposit.
5. The ITO imposed a penalty on the assessee for non-payment of the part of the annuity deposit. Against the levy of penalty, the assessee preferred an appeal to the AAC. The AAC by his order dated March 5, 1969, held that a penalty was not warranted and cancelled the order of the I.T.O. We are told that the AAC added a footnote to his appellate order.
6. It would appear that on May 23, 1969, the Additional Income-tax Officer, Headquarters, working in the office of the Income-tax Commissioner, addressed a letter to the ITO,who was seized of the case of the assessee. Paragraph 2 of the said letter is material and may be fully extracted :
'2. In the footnote to the appellate order, the Appellate Assistant Commissioner has pointed out that the deduction of the entire sum of Rs. 95,120 from the total income is not in order. Now that the assessee contends that only the additional annuity deposit made by her should be treated as the annuity deposit payable for this year, the deduction of the entire annuity deposit of Rs. 95,120 is not correct. You may, therefore, take immediate action under section 147(b) to withdraw the excess deduction allowed on account of annuity deposit. A compliance report in this regard may please be sent to Commissioner by July 10, 1969.'
7. On July 2, 1979, the ITO addressed a notice to the assessee, and it is very clear from the notings to be found in the file that this was in persuance of the directions of the CIT given to the ITO, obviously through the letter dated May 23,1969, which were to revise the assessment after taking action under s. 147(b) of the I.T.Act, 1961. In persuance of the said reassessment proceedings, an order was passed on June 29, 1970, in which it was held that the total income of the assessee rounded off came to Rs. 2,28,780 after allowing an allowance of annuity deposit payable under s. 280-O of the said Act of Rs. 32,680. The ITO accordingly directed that the tax payable should be worked out on this footing on this footing and a demand notice sent for the amount.
8. Aggrieved by the action under s. 147(b) of the I.T.Act, 1961, as well as the final order of the ITO, in the persuance of the notice of reassessment, the assessee carried the matter to the AAC. The AAC rejected the assessee's connection that action under's 147(b) was not warranted. He also rejected the other contentions holding that the annuity deposit which was originally allowed by the ITO had not been paid by the assessee before the regular assessment was completed. He held, therefore, that the ITO was right in withdrawing the credit given for the annuity deposit in excess of 12 1/2% (compulsory portion). Accordingly, the ITO's action was fully upheld and appeal was dismissed.
9. The matter was thereafter carried by the assessee before the Income-tax Appellate Tribunal. Before the Tribunal, it was contended on behalf of the assessee that the ITO had not intended reassessment proceedings on the basis of any fresh information received by him but had on a mere change of opinion on the same set of facts which were known to him when he made the regular assessment. The advocate for the assessee the contended that the case was not covered by the provisions contained in s. 147(b) of the I.T. Act, 1961, and that, therefore, the reassessment was liable to be cancelled on this ground alone.
10. Without prejudice to the said contentions,various other contentions appear to have been advanced on merits. Some contentions were also advanced in the alternative. The Tribunal upheld the arguments and submission advanced on behalf of the assessee and allowed to appeal.
11. We have refrained from setting down the detailed arguments advanced by the advocate for the assessee on a proper construction of the statutory provisions pertaining to annuity deposit, as, in our opinion, the Tribunal was entirely right in quashing the assessments proceedings as being without jurisdiction though perhaps not on the footing that it did. It may, however, be stated in fairness to the Tribunal as also to the learned advocate representing the assessee before it was discussions before the Tribunal and the submissions were based on material as was then available. As a result of directions given by us, Mr. Jetly has produced for our persual, copies of orders of the ACC date March 5, 1969, of the Addl. ITO, Headquarters, from which letter we have already extracted paragraph 2 in the earlier portion of our Judgment. Similarly, the note made by the ITO on July 2,1969, has been shown to us. This note clearly suggests that the action was taken by the ITO in pursuance of the directions of the Commissioners of Income-tax. The said note was also not available to the Tribunal.
12. We will restrict our judgment to a consideration of the propriety and legality of the action under s. 147(b) of the I.T. Act, 1961, on the basis of this additional material and not on the basis of the footnote to be bound at the end of the order of the AAC, which footnote was principally considered by the Tribunal.
13. Assuming for the purpose of this argument that income chargeable to tax has escaped assessment, the question to be considered is whether the ITO had any information in his possession which would justify action under s. 147(b) of the I.T. Act, 1961 Indeed, after pursuing the letter addressed to the ITO on behalf of the Commissioner by the Addl. ITO, Headquarters, being letter dated may 23, 1969, and the note of the ITO dated July 2, 1969, one would be compelled to come to conclusion that it is not any new information which had come into possession of the ITO which had induced him to issue notice under s. 147(b) and commence reassessment proceedings thereafter but that such action was started as a result of clear directives issued by the Commissioner, which directives the ITO was obliged to comply with . This is made abundantly clear by the sentence in the letter which requires a compliance report to be sent by July 10, 1969.
14. This was not and cannot be considered or accepted to be the information as prescribed by the statutory provision, namely, s. 147(b) of the I.T. Act, 1961. It is crystal clear that the ITO had not taken action in pursuance of the footnote of the AAC. We are not obliged to go in the question whether such footnote at the end of, or any observation in the body of,the appellate order may or may not constitute information which will justify reassessment proceedings and action under s. 147(b). We have in this case clear evidence that the action was initiated in the pursuance of the directives of the Commissioner, which directives the ITO was obliged to follow and which directives cannot be equated with the information as contemplated under s. 147(b). If that be so, we would be required to uphold the decision of the Tribunal, when it came to the conclusion (to be found in paragraph 9 of the appellate order of the Tribunal) that the ITO was not in the possession of any information in consequence of which he had reason to believe that income liable to tax had escaped assessment. This is, however, not on the footing which found favour with the Tribunal but on the footing which we have indicated. Accordingly, question No.2 would be required to be answered in the favour of the assessee. Once the answer to this question is given, then, in our opinion, it is unnecessary to consider the other interesting points of law which arise on reference. This is because, in our opinion, no two views are possible on this question. We say so having had the benefit of the further material which was not put up before the Tribunal but which is now available to us.
15. In the result, question No.2 referred to us is answered in negative and in favour of the assessee.
16. Question Nos. 1,3,4,5 and 6 are not answered as explained earlier.
17. Department to pay the costs of the reference to the assessee.