Law:

Section:

Section 147 read with section 256, of the Income-tax Act, 1961 - Income escaping assessment - Position prior to 1-4-1989 - Assessment year 1960-61 - ITO reopened assessment under section 147(b) and disallowed amount paid as pension to widow of an ex-employee as well as amount paid as consultation fee to a Swiss Firm - Tribunal upheld ITO's action in regard to pension payment, but in regard to consultation fee it held that ITO could have had no fresh information entitling him to issue notice under section 147(b) - It, however, held that entire assessment was validly reopened and held on merits that while pension was a permissible deduction, payment made to Swiss Firm was capital expenditure, not eligible for deduction - Subsequently, Tribunal rectified its order and held that assessment could not be reopened in respect of deduction given for payment of consultation fees - Whether referable question of law as to whether Tribunal was competent to rectify its earlier order in respect of assessment year 1960-61 in regard to sum paid by assessee as consultation fees did arise out of Tribunal's order, and High Court erred in summarily dismissing department's application for reference - Held, yes FACTS Based on the assessment of the following assessment year, the ITO reopened the assessment for the assessment year 1960-61, and reassessed the assessee after disallowing the payment of pension made to the widow of an ex-employee, as well as payment of consultation fee to a Swiss firm, treating it as a capital expenditure. On second appeal, the Tribunal upheld the ITO's action in regard to first item as valid, but in regard to second item, held that all the necessary facts having been placed at the time of original assessment, ITO could have had no fresh information entitling him to issue notice under section 147(b). However, in view of its finding that there was escapement of income in regard to one item, the reopening was valid. On merits, the Tribunal held hat the payment of pension was a permissible allowance but the payment to the Swiss firm was a capital expenditure, not allowable as deduction. Later, on assessee's application, the Tribunal rectified its order and…

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