Commissioner of Income Tax vs Pandey Narsingh Sahay

Ashwini Kumar Sinha, J.—In pursuance of this Court''s order, dated 21-2-1977, the Tribunal, 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 assessment year 1963-64 could be valid within the meaning of section 147(a) of the income tax 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 Kashmir Conspiracy Case on a certain stipulated fees besides some travelling allowances and daily allowances for his tour to Kashmir. In respect of the assessment year 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 dated 4-2-1969 for the assessment year 1964-65. It seems before the assessee was assessed on 27-2-1966 for the assessment year 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 assessment year 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 assessment year 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 assessment year 1963-64 and the ITO assessed an amount of Rs. 44,250 in the assessment year 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 proceeding could be reopened u/s 147(a) of the income tax Act, 1961 (''the Act''), 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 earlier 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 assessment year 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 as income in the earlier assessment year 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 section 147(a) was not applicable and, hence, he cancelled the reassessment made for the assessment year 1963-64.

It is already stated above that for the assessment year 1964-65, an assessment was made at Rs. 79,560 by order dated 4-2-1969. For the reasons given by the AAC for cancelling the reassessment for the assessment year 1963-64, reassessment proceedings for the assessment year 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) had not been validly taken and the orders of the AAC were upheld.

The Commissioner filed an application u/s 256(1) of the Act for referring the case to this Court but the Tribunal by its order, dated 17-5-1974, rejected the application. Thereafter an application u/s 256(2) was filed by the revenue and this Court, as said earlier, on 21-2-1977 called for a statement of case from the Tribunal and the Tribunal, submitted a statement of case. Section 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 u/s 139 for any assessment year to the ITO 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 reassessment in cases where income has escaped assessment. The ITO must have reason to believe that income has escaped assessment by reason of the omission or failure on the part of the assessee. In the instant case, as already stated above, the AAC and the 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. The learned senior standing counsel for the revenue has not drawn my attention to any material on record that the concurrent findings given by the AAC and the Tribunal are against the material on the record, 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 section 147(a) was not applicable in the instant case.

In the result, I hold that the reassessment proceeding for the assessment year 1963-64 could not be valid within the meaning of section 147(a) and the question is answered in favour of the assessee and against the revenue. Hearing fee Rs. 250.