Income Tax OFFICER vs SMT. BHIKI BHAIYA.

These four appeals filed by the department relate to the same assessee. Hence, they are heard together and disposed of by this common order for the sake of convenience.

The assessee is an individual. The appeals are concerned with the assessment years 1975-76 to 1978-79. The original assessments were made for these four years allowing the municipal taxes as claimed by the assessee while determining her income from house property. Subsequently, the ITO reopened the assessments u/s 147(a) of the Income Tax Act, 1961 (the Act), on the ground that the assessee had paid a smaller amount of municipal tax than claimed by her at the time of original assessments. In course of the assessment proceedings, the assessee urged that she had concealed no material particulars necessary for the assessments and so the reopening of the assessments u/s 147(a) was bad in law. The ITO recorded in his order sheet dated 16-4-1983 as below for all the four years under consideration :

"As per the A. R.s version and verification of the records, it is found that all material facts have been disclosed regarding provision of municipal taxes and the actual amount paid. So the reopening u/s 147(a) was wrongly made. And for limitation of time, the case could not be reopened u/s 147(b) as under excess relief of tax given. But it is found in the decision of two High Courts. A. P. and Punjab High Court that once the reopening has been made u/s 147(a) as well items u/s 147(b) can be taken as included validly.

Decision - PULAVARTHI VISWANADHAM Vs. COMMISSIONER OF Income Tax, ANDHRA PRADESH., , Commissioner of Wealth-tax Vs. Subakaran Gangabhishan, and COMMISSIONER OF Income Tax, PUNJAB, HIMACHAL PRADESH and BILASPUR, SIMLA Vs. JAGAN NATH MAHESHWARY.,

With these above views, now it is decided to include these items u/s 147(b) as excess relief given. The A. R. to give his contention on 2-5-1983".

The ITO proceeded to make the reassessments by withdrawing a portion of the municipal tax allowed in the original assessments on the ground that the assessee subsequently paid smaller amounts than those which were allowed in the original assessments. He made the reassessments u/s 147(b) relying on the three decision stated in his order PULAVARTHI VISWANADHAM Vs. COMMISSIONER OF Income Tax, ANDHRA PRADESH., Commissioner of Wealth-tax Vs. Subakaran Gangabhishan, and COMMISSIONER OF Income Tax, PUNJAB, HIMACHAL PRADESH and BILASPUR, SIMLA Vs. JAGAN NATH MAHESHWARY., .

The assessee appealed to the AAC and contended that the reassessment made by the ITO were bad in law. It was urged that the reopening u/s 147(a) could not be sustained in the eye of law because the assessee had not failed to disclose fully and truly all the materials necessary for completing her assessments. The municipal taxes provided for in the accounts in accordance with the demands raised at the relevant time together with the resultant loss computed under the income from house property were furnished to the ITO for all the four years under consideration. As the reopening was made u/s 147(a) it was urged that the reopening was invalid. The three cases relied upon by the ITO were cases where the responding u/s 147(a) was validly made and so it was urged that those cases did not apply to the facts of this case. On the other hand reliance was placed on the decision in the case of Commissioner of Income Tax, Bombay Vs. Onkarmal Meghraj (H.U.F.), for the proposition that if an assessment has already because time barred, the same cannot be brought to life by reopening under the Act. Further, it was urged that if an assessment is not validly reopened u/s 147(a), then no reassessment could be made on the basis of such invalid assumption of jurisdiction. The ACC agreed with the contentions of the assessee and quashed the four reassessments made by the ITO u/s 147(b).

Shri B. B. Kundu, the learned representative for the department, urged before me that the AAC erred in her decision. He urged that the reopening was validly made as the assessee did not disclose all the material facts fully and truly including the fact that she had over provided for municipal taxes. He also urged that the decision in the case of Onkarmal Meghraj (supra) did not apply to the facts of this case. According to him, the AAC should have correct the mistake in the reassessment orders and should have declared the reassessments as having been made u/s 147(a). In any case, he urged that the reassessments should have been set aside by the AAC and the ITO should have been directed to make fresh assessments in accordance with law. He relied on the decision in the case of Income Tax Officer, H-Ward and Another Vs. Sudhir Kumar Bhose, for the proposition that if there is a failure to disclose material facts necessary for the assessment, section 147(a) applies. It is not necessary at the time of reopening the assessment to record a finding that income chargeable to tax had actually escaped assessment. In this connection, he referred to Explanation 2 to section 147 which states that production before the ITO of account books or other evidence from which material evidence could with due diligence have been discovered by the ITO will not necessarily amount to disclosure.

Shri J. Pathak, the learned representative for the assessee, on the other hand, supported the order of the AAC. He stated that the aforesaid Explanation 2 does not apply to this case because the assessee had filed the returns and the computation sheets in which the amounts provided for municipal taxes were clearly stated. It was not a case of producing some account books and taking is away after the hearing. Referring to the order sheet entry dated 16-4-1983, he urged that the ITO himself admitted that there was no non-disclosure of material facts and so the reassessment had been made u/s 147(b). He strongly contended that the learned departmental representative cannot rewrite reassessment orders and make out and an entirely new case for the department which is not on record. He referred to the decision in the case of Indra Co. Ltd. Vs. Income Tax Officer, for the proposition that if a notice for reassessment is issued in the absence of the conditions precedent to its issue, then such a notice is liable to be quashed. His point was that there is no question of asking the ITO to make a fresh assessment and that the only order that the AAC could have passed was to annul the reassessments and nothing else. In this connection, he also referred to the decision of the Bombay High Court in the case of New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. Vs. Commissioner of Income Tax, Bombay City-III, wherein it has been held that even it proceedings u/s 147(a) have been validly initiated (which is not the case before us), the ITO could not add back items which would be governed by the limitation u/s 147(b). Next, he referred to the decision in the case of Onkarmal Meghraj (supra) and pointed out that the reassessments for the first two years. out of the four years under consideration were already barred by limitation when the reassessments were taken in March 1982. He urged that this is an additional reason for quashing the assessments for the first two years.

I have considered the contentions of both the parties as well as the facts on record. I find force in the contentions raised for the assessee. In March 1982, the time allowed for reopening the assessments for the assessments years 1975-76 and 1976-77 u/s 147(b) had already expired. Hence, respectfully following the decision in the case of Onkarmal Meghraj (supra), I sustain the quashing of the reassessment orders by the AAC for these two years on this ground alone. Further, there is enough force in the other contentions raised by the assessee in respect of all the four years under consideration. As is clear from the order sheet entry dated 16-4-1983 as well as the reassessment orders passed by the ITO, the ITO has clearly admitted that the conditions for assuming jurisdiction u/s 147(a) were not fulfilled in this case, and so he made the reassessments u/s 147(b). The procedure adopted by the ITO is clearly not tenable in the eye of law. The assessments have not been validly reopened u/s 147(a) and so they have been rightly quashed by the AAC. I agree with the learned representative for the assessee that an entirely new case could not be made out by the learned departmental representative which is not borne out by the facts on record, and is contrary to the stand taken by the ITO himself. As has been held by the Calcutta High Court in the case of Indra Co. Ltd. (supra), if the ITO attempts to assume jurisdiction when he has none, the result of his action has to be quashed or declared as null and void, as has been done by the AAC. I do not see any scope for asking the ITO to do the assessments again, as the very reopening of the assessments has been admitted by him and, in my opinion, rightly so, to be invalidly done u/s 147(a). For the above reasons, I uphold the order of the AAC.

In the result, the four appeals are dismissed.