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Commissioner of Income-tax Vs. Late Lt. Col. B.A. Deodhar (Through L/H Smt. Leela Bai) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 96 of 1978
Judge
Reported in[1981]132ITR668(MP)
ActsIncome Tax Act, 1961 - Sections 147
AppellantCommissioner of Income-tax
RespondentLate Lt. Col. B.A. Deodhar (Through L/H Smt. Leela Bai)
Appellant AdvocateS.C. Bagadiya, Adv.
Respondent AdvocateS.W. Kekre, Adv.
Excerpt:
.....of the act, has held that two conditions have to be satisfied before an ito acquires jurisdiction to proceed to reassess under the provisions of section 147(a) of the act: and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a return under section 139 of the act for the assessment year or to disclose fully and truly the material facts necessary for assessment of that year ;and that both these conditions must co-exist to confer jurisdiction on the ito. as one of the conditions for exercising jurisdiction under section 147(a) of the act was not satisfied, the tribunal, in our opinion, was right in holding that the ito had wrongly 'exercised his jurisdiction in reopening- the assessment..........as set out in the statement of the case, briefly are as follows ; the assessee had filed his return of income for the assessment year 1962-63 showing income from property, salary, capital gains, etc. the order of assessment was passed on 30thdecember, 1963. thereafter, in proceedings against the assessee under the w.t. act for the assessment year 1963-64, it was noticed by the wto that the assessee had claimed deduction of rs. 36,000 as a loan taken by him from his wife for the construction of a house. the wto did not allow that deduction holding that the said sum was invested by the assessee himself. the w.t. assessment for the assessment year 1963-64 was completed on june 28, 1967. thereafter, the ito reopened the income-tax assessment for the year 1962-63 under section 147(a) of.....
Judgment:

Sohani, J.

1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as ' the Act '), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion:

' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the Income-tax Officer wrongly exercised his jurisdiction in reopening the assessment under section 147(a)?'

2. The material facts giving rise to this reference, as set out in the statement of the case, briefly are as follows ; The assessee had filed his return of income for the assessment year 1962-63 showing income from property, salary, capital gains, etc. The order of assessment was passed on 30thDecember, 1963. Thereafter, in proceedings against the assessee under the W.T. Act for the assessment year 1963-64, it was noticed by the WTO that the assessee had claimed deduction of Rs. 36,000 as a loan taken by him from his wife for the construction of a house. The WTO did not allow that deduction holding that the said sum was invested by the assessee himself. The W.T. assessment for the assessment year 1963-64 was completed on June 28, 1967. Thereafter, the ITO reopened the income-tax assessment for the year 1962-63 under Section 147(a) of the Act in order to tax the amount of Rs. 36,000 which was invested in the construction of the house. The ITO held in the reassessment proceedings that the investment of Rs. 36,000 was not disclosed in the original assessment proceedings by the assessee and the ITO accordingly taxed the sum of Rs. 36,000 as income of the assessee from undisclosed sources. On appeal, the AAC held that the assessee had shown the annual letting value of the new construction in his original return and the ITO, therefore, had no jurisdiction to reopen the assessment under Section 147(a) of the Act. The AAC, therefore, set aside the order of reassessment. Aggrieved by that order the department, preferred an appeal before the Tribunal. The Tribunal confirmed the order of the AAC. Hence, at the instance of the department the Tribunal has referred the aforesaid question of law to this court for its opinion.

3. The short question for consideration in this reference is whether the Tribunal was right in holding that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. In ITO v. Lakmani Mewal Das : [1976]103ITR437(SC) , the Supreme Court, while examining the scope of Section 147(a) of the Act, has held that two conditions have to be satisfied before an ITO acquires jurisdiction to proceed to reassess under the provisions of Section 147(a) of the Act: (i) the ITO must have reason to believe that income chargeable to tax has escaped assessment; and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a return under Section 139 of the Act for the assessment year or to disclose fully and truly the material facts necessary for assessment of that year ; and that both these conditions must co-exist to confer jurisdiction on the ITO.

4. In the instant case, the assessee had disclosed in the return filed by him for the assessment year in question the annual letting value of the new portion constructed by him. Thus, the fact that additional construction had been made by the assessee was disclosed by the assessee in his return. The Tribunal has observed that the law did not cast any further obligation on the assessee to show the source of investment in the return, in the prescribed form for filing the return. No provision of law has been brought to our notice by learned counsel for the department to show thatit was the duty of the assessee to disclose the source of the fund which was invested in the construction of the new portion. The assessee thus had disclosed fully and truly all material facts necessary for his assessment for the year in question. As one of the conditions for exercising jurisdiction under Section 147(a) of the Act was not satisfied, the Tribunal, in our opinion, was right in holding that the ITO had wrongly 'exercised his jurisdiction in reopening- the assessment under Section 147(a) of the Act.

5. For all these reasons, the reference is answered in the affirmative and in favour of the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.


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