COMMISSIONER OF INCOME TAX vs LATE PANDEY NARSINGH SHAY, L/H PANDEY GOPAL KRISHNA SAHAY.

Ashwini Kumar Sinha, J. - In pursuance of this courts order dt. 21-2-1977, the ITAT, Patna Bench B has stated the case and the following question has been referred for the opinion of this court :

"Whether, on the facts and in the circumstances of this case, the reassessment proceeding for the asst. yr. 1963-64 could be valid within the meaning of s. 147(a) of the IT Act, 1961 ?"

The assessment year in question is 1963-64. The assessee late Sri Pandey Narsingh Sahay was engaged by Government of India to conduct the Kashimir Conspiracy Case on a certain stipulated fees besides some travelling allowances and daily allowances for his tour to Kashmir. It respect of the asst. yr. 1963-64, the assessee had declared a total income of Rs. 2,03,234. The assessee was assessed on a total income of Rs. 2,30,766 on 27-2-1968 on the basis of the information furnished by him. The assessee was also assessed at Rs. 78,560 by order dt. 4-2-1969 for the asst. yr. 1964-65. It seems before the assessee was assessed on 27-2-1966 for the asst. yr. 1963-64, on 23-1-1968, some information was received from the Ministry of Home Affairs, Government of India giving details of payment made to the assessee in respect of his fees, travelling allowances, boarding and lodging allowances. This information from the Ministry of Home Affairs indicated some discrepancy in the return filed by the assessee for the asst. yr. 1963-64. The assessee reconciled the discrepancy and it was explained that a part of fees had already been shown in the earlier year, that is, for the asst. yr. 1962-63. On this explanation furnished by the assessee the ITO completed the original assessment. The matter did not rest there. As a result of the audit objection, action was again taken for the asst. yr. 1963-64 and the ITO assessed an amount of Rs. 44,250 in the asst. yr. 1963-64 and thus this time the total income was determined at Rs. 2,89,378. This order of the ITO is at Annexure-A in the Statement of Case and forms part of the Statement. As against the order of the ITO reassessing the assessee for the assessment year in question, that is, for, 1963-64 the assessee challenged the basis of reassessment proceeding before the AAC. It was contended on behalf of the assessee that the proceedings could be reopened u/s 147(a) of the IT Act, 1961, only if the income had escaped assessment by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year. The AAC after full consideration found that the figures of total payments were in the knowledge of the ITO when he had made the original assessment. The AAC further held that on the basis of the information then available, the ITO had not only discussed the matter, but had accepted the explanation of the assessee regarding certain amounts assessed in an arlier year and also regarding the allowances paid to him. Not only this the ITO at the time of the original assessment had held that a part of the amount having been included in the asst. yr. 1962-63, could not be included in the assessment year in question that is, 1963-64 and had further held that the allowances paid to the assessee were not taxable. The AAC, on consideration of the entire facts, held that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It was further held by the AAC that the payment received by way of fees was fully disclosed and it was also explained that a part of his fees had been shown income in the earlier asst. yr. 1962-63. The AAC also upheld the finding of the ITO that the allowances paid to him were not taxable. He, therefore, held that even if any income escaped assessment, it was not due to any failure or omission on the part of the assessee and he further held that all the relevant materials being before the ITO, it was for the ITO to draw inference from them. The AAC, on these findings, held that s. 147(a) of the IT Act was not applicable and hence, he cancelled the reassessment made for the asst. yr. 1963-64.

It is already stated above that for the asst. yr. 1964-65, an assessment was made at Rs. 79,560 by order dt. 4-2-1969. For the reasons given by the AAC for cancelling the reassessment for the asst. yr. 1963-64, reassessment proceeding for the asst. yr. 1964-65 were also cancelled and this order of the AAC is at Annexure-B appended to the Statement of the case.

The revenue went before the Tribunal as against the orders passed in both the assessment years, that is, 1963-64 and 1964-65. The Tribunal disposed of both the appeals by a consolidated order and agreed with the findings of the AAC and held that the proceeding u/s 147(a) of the IT Act had not been validly taken and the orders of the AAC were upheld.

The CIT, Bihar, Patna, filed an application u/s 256(1) of the IT Act for referring the case to this court but the Appellate Tribunal by its order dt. 17-5-1974, rejected the application. Thereafter an application u/s 256(2) of the It Act was filed by the revenue and this court as said earlier, on 21-2-1977 called for a statement of case from the ITAT, Patna Bench B and the Appellate Tribunal Patna Bench B submitted a Statement of the case. Sec. 147(a) reads as follows :

"If the Income tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return section 139 for any assessment year to the Income tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or ..."

This section provides for reassment in cases where income has escaped assessment. The ITO must have reason to believe that income has escaped assessment be reason of the omission or failure on the part of the assessees. In the instant case, as already stated above the AAC and the Appellate Tribunal have taken a concurrent view that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Learned senior standing counsel for the revenue has not drawn my attention to any material on the record that the concurrent findings given by the AAC and the Tribunal are against the material on the records. Thus, I hold, on the materials on record, that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for reassessment and in that view of the matter I hold that s. 147(a) of the It Act, 1961 was not applicable in the instant case.

In the result, I hold that the reassessment proceeding for the asst. yr. 1963-64 could not be valid within the meaning of s. 147(1) of the IT Act, 1961 and the question is answered in favour of the assessee and against the revenue Hearing fee Rs. 250.

S. K. Jha, J. - I agree.