1983 (12) TMI 20 - HC - Income Tax

Appellate Tribunal Upholds Decision to Reopen Assessment

The Appellate Tribunal upheld the Income Tax Officer's decision to reopen the assessment under Section 147(a) of the Income Tax Act, 1961, due to the ... Reassessment Issues Involved:1. Validity of reopening the assessment under Section 147(a) of the Income Tax Act, 1961.2. Adequacy of material disclosure by the assessee.3. Justification of the reassessment order.Detailed Analysis:1. Validity of Reopening the Assessment under Section 147(a) of the Income Tax Act, 1961:The primary issue revolves around whether the Income Tax Officer (ITO) was justified in reopening the assessment under Section 147(a) of the Income Tax Act, 1961. The original assessment for the year 1965-66 was completed on October 8, 1965, with a total income of Rs. 8,990. Later, the ITO reopened the assessment, determining the total income at Rs. 75,050, based on the alleged non-disclosure of the true cost of construction of two properties. The ITO held that the assessee had not disclosed the true cost of construction amounting to Rs. 87,300, as opposed to the Rs. 21,235 disclosed by the assessee. The difference of Rs. 66,055 was added to the income originally determined.2. Adequacy of Material Disclosure by the Assessee:The assessee contended that all relevant materials were disclosed at the stage of the original assessment, and therefore, the escapement of income could not be attributed to non-disclosure of material facts. The assessee had initially claimed that Rs. 21,235 was spent on improvements to the properties, supported by a letter dated September 26, 1965. However, subsequent investigations during wealth-tax assessments revealed a higher valuation of Rs. 1,30,158 for the properties, leading to further inquiries. The ITO's spot inspection and local inquiries indicated that the properties were reconstructed rather than merely improved, with a total cost of Rs. 87,300. The valuation by the Executive Engineer of the Valuation Cell supported this finding. The assessee's failure to disclose the purchase of 29 tons of cement used in the construction further supported the ITO's position.3. Justification of the Reassessment Order:The Tribunal upheld the ITO's decision to reopen the assessment, finding that the materials gathered subsequent to the original assessment indicated that the assessee had not disclosed the materials fully and truly. The reassessment order was also found to be correct on merits. The assessee's argument that the ITO could not invoke Section 147(a) without an overt act of concealment was rejected. The court cited the Supreme Court's ruling in Kantamani Venkata Narayana & Sons v. 1st Addl. ITO, which held that merely producing books of account does not discharge the duty to disclose fully and truly all material facts. The court concluded that the ITO had reason to believe that income had escaped assessment due to the assessee's non-disclosure, thus justifying the invocation of Section 147(a).Conclusion:The court answered the question in the affirmative, holding that the Appellate Tribunal was right in law in holding that all necessary materials for the assessment had not been furnished by the assessee, and therefore, the reopening of the assessment under Section 147(a) was valid. The assessee was ordered to pay the costs of the Revenue, with counsel's fee set at Rs. 500.