Commissioner of Income Tax vs Shirinbai Abdullabhai

As per our directions on an application u/s 256(2) of the Income Tax Act, 1961, the following question has been referred to this court for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the reopening of the assessment proceedings u/s 147(a) of the Income Tax Act, 1961, was legally invalid ?"

The asessee filed return of income in July 1974, showing income from house property at Rs. 6,785. The assessment was completed u/s 143(3) on March 29, 1977, accepting the returned income. Subsequently, the Inspector of Income Tax was deputed to evaluate the investment made by the assessee in the construction of a house property at P-l, Hyde Lane, Calcutta, who reported in the matter stating that the house has been constructed by the assessee and his wives jointly, viz., Smt. Fatemabai Hassenali and Smt. Fizza Abbasbhai. A lift has also been installed in that house. As per the report of the Inspector the investment cost during the year is Rs. 8,08,000 as against Rs. 5,08,776 shown by the three co-owners. The difference comes to more than Rs. 1 lakh.

Thereafter a notice u/s 148 of the Act was sent to the assessee for reopening of the assessment u/s 147(a) of the Act. In the reassessment u/s 143(3) read with Section 147(a) the total income assessed was Rs. 22,77,200. Thereafter, the assessee has challenged the reassessment order before the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax (Appeals) it was submitted that all material information relevant to the construction of the house property was furnished before the Assessing Officer and the rent received by the assessee was also duly disclosed. It was also brought to the notice of the Commissioner of Income Tax (Appeals) that the construction of the house was not completed during the previous year relevant to the assessment year 1974-75 and it was completed only in the assessment year 1975-76.

The Commissioner of Income Tax (Appeals) further found that in the reassessment, the Income Tax Officer has wrongly relied on the valuation report of the departmental valuer, which has been obtained after completion of the assessment and that cannot be made the basis for the reopening of the assessment and finally he held that the reopening of the assessment was bad in law.

In appeal before the Tribunal, the Tribunal placed reliance on a decision in the case of Smt. Tarawati Debi Agarwal Vs. Income Tax Officer, of the Calcutta High Court and upheld the view taken by the Commissioner of Income Tax (Appeals).

Heard learned counsel for the Revenue. None appears for the assessee. The admitted facts are that the assessment has been completed on the basis of material placed by the assessee in respect of the construction of the house and also duly disclosed the rent received of the house so constructed. The material fact that the assessee along with his two wives has constructed the house, was disclosed. Details of the investment in the house have also been disclosed. Thus, it cannot be said that any material fact has been concealed by the assessee, or the assessee has not disclosed fully and truly the material facts of his income. The so-called information is a report of the Inspector who had subsequently been deputed by the Assessing Officer to find out the investment in the construction of the house and also obtained a report of the departmental valuer. The Assessing Officer has made this report the basis for reopening of the assessment u/s 147(a). The condition precedent is that the Assessing Officer has to justify that the assessee has not disclosed the material facts in respect of his income in the relevant previous year. The report of the Inspector has subsequently been obtained in respect of the investment in the construction of the house and also the valuation of the departmental valuer which is also subsequently obtained. Therefore, it cannot be said that the assessee has not disclosed his income fully and truly. Even otherwise, the issue is squarely covered by the decision in the case of Smt. Tarawati Debi Agarwal Vs. Income Tax Officer, .

In the result, we answer the question referred in favour of the assessee and against the Revenue.

The application is thus disposed of.