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Smt. Sitadevi N. Podar Vs. Second Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1982)1ITD1021(Mum.)
AppellantSmt. Sitadevi N. Podar
RespondentSecond Income-tax Officer
Excerpt:
.....31-3-1975. the assessee is an individual. during the previous year under consideration, she sold silver utensils for rs. 4,05,959. the details of the utensils sold are as below :particulars weight amount rs.kalash one 31.165 34,201.50kalash two 62.340 70.755.90kalashone 31.160 34,276.00topne one 69.970 79,419.95kundi one 79.500 90,252.50top one 85.460 96,997.10 4,06,958.95 the assessee had not declared the details of the utensils in the original return, but had declared the same in the revised return, filed before the original assessment was made. the claim of the assessee was that the silver utensils were personal effects, and so were not capital assets within the meaning of section 2(14) of the income-tax act, 1961 ("the act"). hence, no capital gains arose out of their sale. the ito.....
Judgment:
1. This appeal has been filed by the assessee against the order dated 13-10-1981 of the Commissioner (Appeals) relating to the assessment year 1975-76, the previous year of which ended 31-3-1975. The assessee is an individual. During the previous year under consideration, she sold silver utensils for Rs. 4,05,959. The details of the utensils sold are as below :Particulars Weight Amount Rs.Kalash One 31.165 34,201.50Kalash Two 62.340 70.755.90KalashOne 31.160 34,276.00Topne One 69.970 79,419.95Kundi One 79.500 90,252.50Top One 85.460 96,997.10 4,06,958.95 The assessee had not declared the details of the utensils in the original return, but had declared the same in the revised return, filed before the original assessment was made. The claim of the assessee was that the silver utensils were personal effects, and so were not capital assets within the meaning of Section 2(14) of the Income-tax Act, 1961 ("the Act"). Hence, no capital gains arose out of their sale. The ITO accepted the above contention of the assessee, and completed the original assessment on 20-11-1975, without including any amount as capital gains in the total income.

2. Subsequently, the Commissioner started proceedings under Section 263(1) of the Act on the ground that the silver utensils were not personal effects, and so they were capital assets on the sale of which capital gains arose to the assessee. Since no capital gain was charged to tax in the original assessment he proposed to revise the order under Section 263 accordingly. The assessee gave a written reply explaining that the nature of the silver utensils were such that they were held for personal use. After considering the reply of the assessee, the Commissioner dropped the proceedings under Section 263 and intimated the same to the assessee by his letter dated 30-3-1975.

3. Subsequently, the ITO reopened the assessment under Section 147(6) of the Act on 27-3-1980. The reason recorded for reopening the assessment is as below: 27-3-1980: On scrutiny of the assessee's statement of accounts relevant to assessment year 1975-76 it is seen that the assessee has sold silver utensils for Rs. 4,05,959 which sum has been credited to the capital account of the assessee. In her return, the assessee has not declared any capital gain on this sale nor has he claimed any exemption in this respect in her return. Now in view of the Supreme Court decision in H.H. Maharaja Rana Hemant Singhji v. CIT [1976] 103 ITR 61 holding that silver articles are not deemed to be 'effects' meant for personal use and this information having come to my knowledge subsequent to the computation of original assessment, I have reason to believe that gain on sale of silver utensils has escaped assessment. Hence, action under Section 147(6) for the assessment year 1975-76 is necessary.

The assessee objected to the reopening of the assessment under Section 147(6), which was overruled by the ITO. Reliance was placed by the assessee on the decision of the Tribunal in the case of Ramadevi R.Poddar (IT Appeal No. 1031 (Bom.) of 1981 dated 29-9-1981) for the proposition that the silver utensils were actually personal effects held for personal use. The ITO did not agree. He held the utensils to be not personal effects and calculated capital gains at Rs. 3,44,828 and brought the same to tax accordingly.

4. The assessee appealed to the Commissioner (Appeals), and contended that the action of the ITO was not justified. The Commissioner (Appeals), however, held that the decision in the case of H.H. Maharaja Rana Hemant Singhji (supra) came to be known by the ITO after he completed the original assessment, and that the said decision constituted "information" so that the assessment was validly reopened under Section 147(6). On merits, he also agreed with the ITO that the utensils under consideration were not personal effects. Hence, he confirmed the reassessment as made by the ITO.5. Shri N.R. Mulla, learned representative for the assessee, urged before us that the revenue authorities erred in their decision. He stated that the nature of the silver utensils were such that they could be used either in the kitchen or on the dining table for day-to-day living purposes and so, they were personal effects. He relied on the decision of the Tribunal in the case of Smt. Ramadevi R. Poddar (supra) and also on the decision dated 8-12-1976 in the case of Ramrikhdas Poddar & Sons, HUF (IT Appeal No. 2598 (Bom.) of 1975-76). Secondly, he stated that the case of H.H. Maharaja Rana Hemant Singhji (supra) was quite different on facts. In that case, the assessee claimed a large amount of gold coins to be personal effects on the ground that they were used for puja on ceremonial occasions. The question of silver utensils held for day-to-day use was not considered in that case.

Hence, he urged that the said decision would not constitute "information" for reopening the assessment under Section 147(6).

Thirdly, he stated that the Commissioner had already considered this issue in the course of proceedings under Section 263, and had come to the conclusion that the utensils under consideration were indeed personal effects, and so he had dropped the proceedings. He pointed out that the Commissioner dropped the penalty proceedings because of the decision of the Tribunal dated 8-12-1976 in the case of Ramrikdas Poddar & Sons (supra) (an allied case) wherein similar utensils were held to be personal effects. He pointed out that the quantity of utensils in that case was still more and so, the case of the assessee, before us, was even stronger. His point was that the ITO did not have any jurisdiction to start fresh reassessment proceedings under Section 147(6) on the same point on which the Commissioner, after due enquiry, came to the conclusion that the original assessment was correctly made.

6. Shri A.A. Makhija, learned representative for the department, on the other hand, supported the order of the Commissioner (Appeals). He pointed out that in a letter accompanying the revised return, it was stated by the assessee that the silver utensils were lying at her native house in district Fatepur in Rajasthan. Consequently, he stated that those utensils were not actually put to daily use by the assessee, and so they could not be personal effects. He pointed out that the decision of the Supreme Court in the case of H.H. Maharaja Rana Hemant Singhji (supra) came after the original assessment was made on 20-11-1975, and that decision constituted "information" for reopening the assessment under Section 147(6). Regarding the jurisdiction of the ITO to proceed under Section 147(6) on a point already considered and found to be untenable by the Commissioner under Section 263, he stated that the Commissioner did not pass any final order on merits. The Commissioner merely proposed to proceed under Section 263 but dropped the proceedings for some reasons, which did not mean that the ITO lost his jurisdiction under Section 147(6).

7. Shri Mulla explained that the family to which the assessee belongs was very old and rich and the silver utensils were acquired long back by the family and were actually being daily used for personal purposes, at their native place. Subsequently, partition took place in the family, and some of the persons migrated to Bombay. They did not think it fit to carry the utensils with them and so they were left at the native house. He stated that the utensils were actually used for personal purposes whenever the occasion arose.

8. We have considered the contentions of both the parties as well as the facts on record. We have gone through the list of utensils under consideration, enumerated earlier in this order. Evidently, the utensils were intended for personal use either in the kitchen or on the dining table. The very nature of the utensils were such that they could be held only for personal use. Hence, we come to the conclusion that the utensils were indeed personal effects held for personal use and so, they were not capita] assets. Consequently, the original assessment order passed by the ITO was correct, and no income had escaped assessment. We respectfully agree with the decisions of the Tribunal in the case of Smt. Ramdevi R. Poddar (supra) and Ramrikhdas Poddar & Sons both of which are allied cases with more or less similar facts.

9. In view of our above discussion, it is not necessary to consider the other contentions raised by the learned counsel for the assessee.

However, in order to complete the record, we may record our comments thereon. It is true that the decision of the Supreme Court in the case of H.H. Maharaja Rana Hemant Singhji (supra) came after the original assessment was made. But, the facts of that case were entirely different inasmuch as that case was concerned with the large quantity of gold and silver coins, and was not at all concerned with silver utensils usable in the kitchen or the dining table. Hence, though the said decision may be regarded as an "information" for the purpose of Section 147(6), yet, in our opinion, no reasonable man could have entertained a reasonable belief on reading that decision that income had escaped assessment in the instant case. Unless a reasonable belief can be shown to exist on the part of the ITO, no proceedings under Section 147(6) could be validly initiated. Hence, our conclusion on this point is that the reopening under Section 147(6) was not validly done. We are fortified in this conclusion of ours by the decision of the Supreme Court in the case of Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 and Sheo Nath Singh v. AAC [1971] 82 ITR 147.

10. Coming to the third point raised for the assessee, we find that the Commissioner indeed considered the very point for which the ITO reopened the assessment, but dropped the proceedings obviously because there was no error prejudicial to the interests of the revenue in the original assessment order. The implication is clear, namely, that the finding of the Commissioner was that the silver utensils were indeed personal effects, so that on their sale, they did not give rise to any capital gains. It is also clear that the action of the Commissioner was supported by the decision of the Tribunal in the case of Ramrlkhdas Poddar & Sons (supra). Strictly speaking, the ITO might not have lost (he jurisdiction to proceed under Section 141(b) merely because the Commissioner had dropped the proceedings under Section 263. To our mind, such a view is a highly technical one. When the higher officer of the department has examined and rejected a particulat stand as untenable, we do not see any reason for a lower authority to repeat the same exercise on the point once again. Hence, we find force even in the third point raised for the assessee.

11. In the result, we cancel the reassessment made under Section 147(6) and allow the appeal.


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