1. This is a reference under Section 256(1) of the I.T. Act, 1961 (hereafter referred to as ' the Act '). The assessment year involved is 1950-51 the previous year being the financial year 1949-50. At the instance of the Commissioner of Inome-tax, Meerut, the Income-tax Appellate Tribunal, Delhi Bench-E (hereafter referred to as 'the Tribunal'), has referred the following questions for our opinion :
' (1) Whether the Appellate Tribunal was legally correct in its view that the reassessment made on March 28, 1970, for the assessment year 1950-51 in pursuance of Section 147(a) of the Income-tax Act, 1961, constituted a mistake apparent from record which could be rectified under Section 154 of the Income-tax Act, 1961 ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in cancelling the order under Section 154 for the assessment year 1950-51 passed by the Income-tax Officer '
2. The facts found by the Tribunal, stated in brief are that the assessee, an HUF, had income by way of share of profits from certain firms, income from property and dividends. For the assessment year 1950-51, the assessment was completed on February 28, 1955, and the total income was determined at a loss of Rs. 5,174. It appears subsequently some cash credits were found entered in a duplicate set of account books, and after some correspondence with the assessee the ITO gave a notice to it under Section 148 of the Act on November 26, 1965. Pursuant to that notice the assessee filed a return disclosing income as per assessment made on February 28, 1955. Subsequently, by a letter dated March 26, 1970, the assessee surrendered the following amounts for assessment :
From Ranjana Farm
From Sri Avinash Chand
3. It was stated in that letter :
' However, in order to have peace with the department and to avoid worry to us we beg to surrender the said amounts mentioned below as our income subject to the condition that the penalty will be levied at 331/3% according to law and the amount of tax be allowed to be paid in 12 equal monthly instalments.'
4. On the basis of that letter the ITO completed the assessment and determined the total income at Rs. 71,030 by his order dated March 28, 1970. Since the minimum amount of penalty imposable exceeded Rs. 1,000, he referred the case to the IAC who in due course passed a penalty order.
5. On November 30, 1970, the assessee filed an application under Section 154 of the Act praying for cancellation of the reassessment order on the ground that the issue of notice under Section 148 of the Act was bad in law in view of the decision of the Supreme Court in J.P. Jani, ITO v. Induprasad Devshanker Bhatt : 72ITR595(SC) . The ITO rejected that application by his order dated March 24, 1972, for the following reasons : that the assessee had not taken any objection as to the jurisdiction of the ITO as required under Section 124(5) of the Act, that the decision in J.P. Jani's case was not applicable to the facts of the instant case because the concealments for the assessment years 1950-51 to 1960-61 amounted to more than rupees one lakh, that the reassessment was made on the basis of a settlement arrived at with the assessee and, lastly, that the assessee had also filed a revision under Section 264 of the Act before the Commissioner, Delhi (Central), on the same point.
6. Aggrieved, the assessee filed an appeal. The IAAC agreed with the reasons which had been given by the ITO and dismissed the appeal by his order dated August 7, 1972. The assessee then took up the matter in further appeal before the Tribunal. The learned Members constituting the Tribunal Bench passed separate orders but concurred in the ultimate conclusion in the matter and allowed the appeal. We shall refer to the decisions given by the learned Members in detail a little later. Now, at the instance of the Commissioner the questions mentioned above have been referred to this court.
7. There is no controversy now left after the decision in J.P. Jani's case : 72ITR595(SC) , that the ITO cannot issue a notice under Section 148 of the Act in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the 1922 Act on the date when the new Act, came into force, that is, April 1, 1962. In the case of the present assessee for the year under consideration, that is, 1950-51, the assessment could have been reopened only by 31st March, 1959. In other words, the reopening of the assessment for this year was barred under the 1922 Act at the date when the new Act came into force, Here, the notice to reopen the assessment was issued on November 26, 1965, and served on December 6, 1965. In other words, it was bad in law and without jurisdiction. However, an attempt was made by the department to take the benefit under Clause (ii) of the first proviso to Sub-section (1) of Section 34 of the 1922 Act. Under this clause the ITO could issue a notice under Clause (a) of Sub-section (1) before eight years have elapsed after the expiry of the year in respect of which assessment was proposed to be taken, 'unless (if ?) the income profits or gains chargeable to income-tax which have escaped assessment or have been under-assessed or assessed at too low a rate or have been made the subject of an excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amount to or are likely to amount to one lakh of rupees or more in the aggregate, either for that year, or for that year and any other year or years after which or after each of which eight years have elapsed not being a year or years ending before the 31st day of March, 1941'. In other words the limitation of eight years stands extended if the escaped income exceeds rupees one lakh. This may be either for the year for which action is proposed to be taken or may be for that year and any other year of years after which, or after each of which eight years have elapsed. In our opinion the provision clearly lays down that the aggregation for the purposes of finding out the escaped income could be for the year for which the action was proposed or for that year and the years preceding to it. Such aggregation could not be permitted in regard to the year or years subsequent to the year for which action was sought to be taken. In other words in the instant case the aggregation could have been allowed for 1948-49 or 1949-50 but not in respect of the years following 1950-51.
8. It was submitted before us by the learned standing counsel that in view of the fact that the learned Judicial Member recorded a clear finding that the confidential record which the department sought to produce before the Tribunal at the time of the hearing of the appeal to show the concealment of income on the assessee's part had exceeded rupees one lakh and should have been taken on record and that a debatable question was involved in the case, and yet he did not differ from the ultimate conclusion at which the learned Accountant Member had arrived, it would be in the interest of justice that the matter be remanded for a fresh hearing by the Tribunal.
9. After tearing counsel for parties we are not inclined to agree with the above submission. As noted above the eight years' period of limitation could be extended only if the escaped income exceeded rupees one lakheither for the year under consideration or, for that year and the year or year after which or after each of which eight years have elapsed. The main ground given by the ITO for rejecting the assessee's application under Section 154 of the Act was :
' After looking into the records it is also found that the concealment for the assessment years 1950-51 to 1960-61 amounts to more than rupees one lakh. '
10. The view was patently erroneous because any alleged concealment of income for the assessment years subsequent to 1950-51 could not have been aggregated in order to reopen the assessment for that year. The AACadopted the same reasons. Before the Tribunal it was contended by the departmental representative that the ITO could assume jurisdiction if the had bona fide belief that income had escaped assessment for a number of years if the aggregated concealed income was rupees one lakh or more. It was also urged that for the year under consideration the ITO had not found that the concealment was less than rupees one lakh. All that he had found was that it was in excess of Rs. 76,201 and that if the amounts originally included in the assessments for the years 1954-55, 1955-56 and 1956-57 were also taken into consideration the income concealed would exceed rupees one lakh. The departmental representative also contended that in the confidential file of the ITO there was material which indicated that the concealment which he had in mind was in excess of rupees one lakh and permission was sought for producing that confidential record before the Tribunal. The learned Accountant Member repelled this contention and the prayer for the production of the confidential file by observing :
' In the present case according to the information available on the record an amount of Rs. 76,201 had escaped assessment for the year 1950-51. Apart from this amount there is no indication of any other amount which had escaped assessment and which could have been considered by the Income-tax Officer along with the amount of Rs. 76,201 forassuming jurisdiction under Section 34. '
11. As for the additions of Rs. 13,452, Rs. 16,772 and Rs. 17,658, made by the ITO in the assessments for the assessment years 1954-55, 1955-56 and 1956-57, respectively, to which reference was made at the time of hearing, it was observed that those amounts had been deleted on appeal but certainly they could have entered into the calculation of the ITO. However, he could not have considered these amounts for assuming/jurisdiction for the assessment year 1950-51, because for those three assessment years notices had been issued before eight years had elapsed,; Therefore those amounts could not be aggregated with the amount for the year 1950-51. The learned member also observed that the department could not be allowed to bring any new material on record unless they were satisfied that the party was prevented by reasonable cause from bringing the material, on record at an earlier stage. This material had not been brought on the record at any earlier stage nor was the information such which could be kept confidential. The learned Member also observed that :
' As the record stands there is no suggestion of any income escaping assessment for the years 1948-49 and 1949-50. There is still less indication that the income for the earlier years were considered along with the year 1950-51, before the Income-tax Officer assumed jurisdiction. All that is visible on the record is that income of Rs. 76,201 had in the opinion of the Income-tax Officer escaped assessment. '
12. The learned Judicial Member did not address himself to the legal aspect of the case and was influenced 'essentially by two facts in taking the view, that the confidential record should have been taken on record and that a disputed question of fact was involved in the case. Those aspects are that the assessee by agreeing to the settlement prevented the department from leading its entire evidence and placing all its cards on the table. We do not think that it was a relevant circumstance for consideration because this is the situation which obtained after the proceedings had been initiated. If the initiation of the proceedings itself was not permissible in law, the consent given by the assessee to be assessed at a particular figure would not give jurisdiction to the ITO to make the assessment on that figure. The second aspect considered is that the conduct of the assessee had not been above board since it made no secret of it when it conceded concealment of income of over Rs. 71,030 and hence no indulgence in his case was called for. We do not think that the conduct of a party was at all relevant for the decision of the issue involved in the case.
13. Even after giving this finding the learned Judicial Member, to quote his own words, held : 'in such discretionary matters I would not venture to differ'. We would have acceded to the submission made by the learned standing counsel if it had ever been the case of the department that while initiating proceedings for the year under consideration the ITO had in his mind any escaped income for the years prior to 1950-51, and the aggregation of such income exceeded rupees one lakh. As we have noted above, the ITO himself observed that after looking into the records the concealment for the assessment years 1950-51 to 1960-61 amounted to more than rupees one lakh. Any alleged escaped income for an year subsequent to 1950-51 could not have been taken into consideration and, therefore, it was only a futile attempt on the part of the department to seek the production of the confidential record at the stage of the Appellate Tribunal. Thus, there could have been no controversy in regard to the facts of the case. In other words, there was no disputed fact involved so as to take out the case from the ambit of Section 154 of the Act.
14. In view of the discussion above, we answer both the questions referred in the affirmative, in favour of the assessee and against the department. The respondent-assessee is entitled to costs which are assessed at Rs. 250.