Banarsi Dass Seth and Others vs Commissioner of Income Tax

B.S. Dhillon, J.—This order will dispose of I.T.C. No. 57 of 1975 and I.T.C. No. 58 of 1975.

The brief relevant facts are that the assesssee in the course of the original assessment proceedings did not disclose that he had constructed four more floors to the already existing multi-storeyed building at P-11, New Howrah Bridge Approach Road, Calcutta. Later on, when the ITO came to know of this fact in the course of proceedings for the assessment year 1961-62, he reopened the assessments for 1958-59 and 1959-60, u/s 147 of the I.T. Act, 1961 (hereinafter referred to as "the Act"). In the said assessment proceedings, the ITO added a sum of Rs. 30,000, on account of income from these four floors of the multi-storeyed building, which, according to the assessee, were meant for'' own occupation. The addition was upheld by the AAC in appeal and also by the Income Tax Appellate Tribunal, "C" Bench, Calcutta. The Appellate Tribunal while holding that the reopening of the assessment u/s 147(a) of the Act was justified, directed the AAC to make proper enquiries and determine whether the construction of these floors had been completed and these floors were fit for occupation and to decide whether any addition can be made on account of income from these floors. The assessee made a reference application to the Appellate Tribunal with a prayer that the following common question of law be referred to the High Court at Calcutta for its opinion :

"Whether, on the facts and in the circumstances of the case, the proceedings u/s 147 of the Act, 1961, could be initiated at all ?"

The Tribunal having refused the prayer, the assessee has approached this court for issuing necessary directions in this regard.

After hearing the learned counsel for the parties, we are of the opinion that the question sought to be referred is essentially a question of law and not of fact in view of the peculiar facts and circumstances of the case. It has been contended by the learned counsel for the assessee that for reopening the assessment u/s 147(a) of the Act, the authorities should have some material before them and only then the assessment proceedings could be reopened. It has been contended that the AAC while passing orders in the assessment proceedings for 1961-62, recorded a categorical finding that the floors of the building in question were not even complete till the assessment year 1961-62 and were not ready for occupation. It has been contended that even though the addition of Rs. 30,000 was made in the assessment proceedings for 1961-62 for the income from the said floors, yet there was no material to hold that the said floors had been completely constructed and were ready for occupation during the assessment year 1958-59. It has thus been contended that if assessment proceedings are reopened without there being any material, the impugned order is without jurisdiction.

It is not necessary for us to pronounce upon the merits of the contentions at this stage, but suffice it to say that taking into consideration a finding of the AAC that the construction was not complete and the floors were not even ready for occupation till the assessment year 1961-62, and there being no other material pointed out to us on the basis of which assessment could be reopened, we are of the opinion that a question of law, on the facts and circumstances of this case, do arise.

For the reasons recorded above, we allow both the petitions and direct the Tribunal to refer the above-mentioned common question of law to this court for its opinion.