1. Involving very interesting facts, these appeals are filed by the revenue for the assessment years 1974-75 and 1975-76 against the orders of the Commissioner (Appeals). The assessee has filed cross-objections for both the years. Both the appeal and the cross-objections can be conveniently decided together and they are, therefore, consolidated.
The assessee, inter alia, owns a house property at Chandigarh, income from which was assessed by the ITO in the original assessments framed on 28-10-1976 and 25-8-1977 for the years under appeal, respectively.
Unexplained investment in the construction in both the years was not examined by the ITO at the stage of the original assessments. For both the years, the ITO observed at the stage of the original assessments that the investment in the property was not examined, as the construction was not complete during the period relevant to the assessment years in question. He already observed in both the assessment orders that the investment in the property would be considered after completion of the construction and after the receipt of the report of the Valuation Officer. Admittedly, the assessee showed the investment made in the construction up to the assessment year 1973-74. The construction of Chandigarh property started in the year 1968 and that continued up to the assessment year 1976-77. So the facts are whereas the assessee showed the yearwise investment in the construction up to the assessment year 1973-74, no precise investment made in the latter years, was shown in the returns. The assessee filed property accounts along with the returns for both the years and disclosed therein Chandigarh property income. The property was let out for the first time during the assessment year 1974-75. Details of the rent received from various tenants were duly given in the property account accompanying the returns. As pointed out in the original assessment orders, the ITO made reference to the valuation cell and they valued the property at Rs. 10,73,900 excluding the cost of land.
In course of the reassessment proceedings the assessee furnished the revised chart showing the total investments in the various year at Rs. 7,68,897 including the cost of land of Rs. 92,539. Excluding the cost of land, the total investment as per the assessee during the assessment years 1968-69 and 1976-77 came to Rs. 6,77,358. The ITO was, therefore, of the view that unexplained investment was to the tune of Rs. 3,97,542 (Rs. 10,73,900-Rs. 6,76,358). He apportioned the unexplained investment to the extent of Rs. 3,14,907 to the assessment year 1974-75 and to the extent of Rs. 70,670 to, the assessment year 1975-76 and took the view that the said unexplained investment, being the income of the assessee from undisclosed source, had escaped assessment in two years. He, therefore, made the additions of Rs. 3,14,907 and of Rs. 70,670 in the reassessment orders for the year under appeal, respectively, framed on 22-3-1980.
2. Aggrieved, the assessee carried the dispute in appeals to the Commissioner (Appeals) who was of the view that the purported unexplained investment, as added by the ITO in the reassessment orders framed under Section 147(a), read with Section 148, of the Income-tax Act, 1961 had not escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment and, therefore, he wrongly exercised jurisdiction under Section 147(a) read with Section 148.
Without dilating the merits of the case, the Commissioner (Appeals), having accepted the legal objection of the assessee, cancelled the reassessment orders.
3. Aggrieved, the revenue had come up in appeals for both the years before the Tribunal. If the answer to the legal objection as given by the Commissioner (Appeals) is sustained, then there would be no need to discuss the cross-objections of the assessee.
4. The main question for consideration is whether or not the ITO rightly exercised jurisdiction for initiating the reassessment proceedings for the years under appeal. A perusal of the orders of the Commissioner (Appeals) prima facie showed that the ITO was not right in having exercised jurisdiction under Section 147(a) as no income had escaped assessment by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. But, Shri Swaroop, learned senior departmental representative, desired to argue the case at length and he did so, but in the ultimate analysis, we find that there is no substance in his arguments and the orders of the Commissioner (Appeals) deserve to be upheld. The question is "whether the purported unexplained investment of Rs. 3,14,907 and of Rs. 70,670 has escaped assessment by reason of any omission or failure on the part of the assessee". Shri Swaroop argues that whereas the assessee disclosed the investment having been made by it up to the assessment year 1973-74 in all the returns, no disclosure of investment was made by the assessee in the returns pertaining to the years under appeal. Admittedly, precise amount of investment was not disclosed by the assessee in the returns filed for the years under appeal. But the argument of Shri Ranka, learned counsel for the assessee, is that the ITO was not in the dark about the fact of construction and what he very well knew was that the construction which had started several years before, continued during the years under appeal. That being so, Shri Ranka says that the ITO well knew that investment had been made by the assessee during the years under appeal on the construction.
Admittedly, in the property account accompanying the returns filed for the years under appeal, the assessee gave the details of the rent, the tenancy and the property income. Shri Ranka, therefore, says that the ITO could have made enquiry regarding the investment made by the assessee during the years under appeal and, if there were any unexplained investments, he would have added the same at the stage of the original assessments. The argument is that he himself chose not to make any further investigation regarding the investment and he postponed the enquiry of investment until the date of completion of the construction and the date of receipt of the report of the Valuation Cell, The ITO clearly observed in both the original assessment orders that he preferred not to examine the investment at that stage, 'as the construction was yet to be completed and that he desired to do the needful on the receipt of the report of the Valuation Cell.
From these facts, it is amply clear that the ITO was well aware that the assessee carried on the construction and made the investment during the years under appeal. The short submission of Shri Swaroop is that it is irrelevant to consider the omissions or the failure of the ITO, but what is germane is whether there is any omission or failure on the part of the assessee in disclosing the material facts necessary for making the assessment. He says that the assessee having failed to disclose the actual investment made in the construction during the years under appeal, the cases are completely covered by Section 147(a) and, therefore, the ITO rightly exercised jurisdiction for reopening. We are not at all impressed by the submission of Shri Swaroop. No column of the return enjoins upon the assessee to disclose the actual investment made in the construction. The facts, necessary for making the assessments, were already before the ITO. He knew that the construction activity continued during the years under appeal. Therefore, the ITO would have got the construction being made during the years under appeal valued or he himself would have valued them and he would have asked the assessee to explain the investment and if any unexplained investment were there after the necessary enquiry, then the same would have been added in the original assessments. The ITO was not at all handicapped in assessing the unexplained investment in the absence of the disclosure of actual investment in the returns by the assessee. The ITO is not only an assessing authority, but an investigating authority too. He having failed to make enquiry regarding the investment made on the construction during the years under appeal and he having deliberately postponed the examination of the investment at the stage of the original assessments, a view can be taken unhesitatingly that if there is any escapement of income that is due to the deliberate omission or failure of the ITO and not due to any omission or failure of the assessee. The ITO cannot blame the assessee for his omission and he cannot legally re-open the assessments under Section 147(a). Shri Swaroop argues that material facts necessary for making the assessments are not only those disclosures of which is specifically mentioned in the return form, but there may be material facts disclosure of which is not specifically required in any column of the return form. In this connection, he relied on several authorities, namely, Mriganka Mohan Sur v. CIT  95 ITR 503 (Cal.), Sur Enamel & Stamping Works (P.) Ltd. v. CIT  105 ITR 183 (Cal.), CWT v. Subakaran Gangabishan  121 ITR 69 (AP) (FB) Ganga Saran & Sons (HUF) v. ITO  130 ITR 212 (Delhi), ITO v. A. R. (P.) Ltd.  125 ITR 177 (Cal.) and CIT v. Associated Stone Industries (Kotah) Ltd.  130 ITR 868 (Raj.) . A careful perusal of the authorities being relied on by Shri Swaroop shows that, they do not substantiate his contention that disclosure of actual investment is a material fact within the meaning of Section 147(a). Circumspection of all the submissions and other materials lead us to the conclusion that disclosure of actual investments made in the construction is not sine qua non for making the assessment or a material fact within the meaning of Section 147(a) and, therefore, there is no escapement of any income in the instant case due to any omission or failure on the part of the assessee by not having disclosed the actual investment only. For the reasons, we uphold the orders of the Commissioner (Appeals).
5. Then, the alternative argument of Shri Swaroop is that the re-opening is sustainable under Section 147(6). Shri Ranka strongly opposed this plea of the revenue. He says that such plea having not been raised by the authorities below, it cannot be admitted at such a belated stage by the Tribunal. Shorn of the legal verbiage whether the new plea is admissible or not, we are of the opinion that on facts also Section 147(6) cannot be invoked in this case. The report of the Valuation Cell cannot be said to be the subsequent information, as it is a creation of the ITO himself. He himself postponed the examination of the investment until the date of receipt of the report of the Valuation Cell, which he would have obtained at the stage of original assessments itself. On these facts, it cannot be said that the ITO received any subsequent information that there was escapement of income. The information which was already considered to be the material evidence by the ITO at the stage of the original assessments, but the procurement of which was deliberately postponed by the ITO to a future date, does not come within the purview of Section 147(6). This provision envisages information which was not available to the ITO at the stage of the original assessment and which was not at all under contemplation of the ITO. In the instant cases, the ITO himself opined that the report of the Valuation Cell would be a good guideline to determine the unexplained investment by the assessee, but instead of obtaining the report of Valuation Cell at the time when he was seized of the assessment proceedings at the initial stage, he postponed the procurement of the report until the date of completion of the construction. These facts do not justify the invocation of Section 147(6).
It was also argued by Shri Swaroop that it is not the duty of the ITO to infer out the facts regarding disclosure after exercising due diligence and making research into the other evidence brought on record by the assessee. Explanation 2 to Section 147 is in point. The said Explanation 2 has no bearing on the facts of these cases. These are the cases wherein the ITO was already in seize of the attention, but he postponed the enquiry regarding the actual investment on his own accord. The ITO was not helpless at the stage of the original assessments in estimating or in determining the actual investment in any other way, when the assessee failed to disclose the precise amount of investment. The ITO is fully armed under the Income-tax Act to exercise his best judgment, when an income is not precisely disclosed by the assessee. Once it is known to the ITO that the investment was made by the assessee on the construction, then it is his duty to determine the investment and add the unexplained investment and such duty cannot be postponed to a future date. So, neither under Section 147(a) nor under Section 147(b) can the re-opening be upheld.6. The assessee having succeeded on the legal objections, there is no need to go into the merits of the case and, therefore, the cross-objections of the assessee are infructuous.
7. In the result, both the appeals of the revenue are dismissed and the cross-objections of the assessee stand disallowed being infructuous.