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Bela Singh Pabla Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1982)1ITD370(Delhi)
AppellantBela Singh Pabla
Respondentincome-tax Officer
Excerpt:
1. in this appeal, filed by the assessee, aground was raised at the time of hearing of the appeal before the tribunal to the effect that the assessment made by the ito under section 143(3)/147 of the income-tax act, 1961 ("the act"), was illegal as he had submitted a draft assessment order under section 144b to the i ac and completed the assessment in accordance with the directions issued by him. according to the assessee, the provisions of section 144b are not applicable to an assessment made, pursuant to the provisions of section 147.considering the controversial nature of this contention, and the fact that certain benches of the tribunal have also accepted such a contention in certain cases, and also the far reaching importance of the decision on this issue, the bench considered it.....
Judgment:
1. In this appeal, filed by the assessee, aground was raised at the time of hearing of the appeal before the Tribunal to the effect that the assessment made by the ITO under Section 143(3)/147 of the Income-tax Act, 1961 ("the Act"), was illegal as he had submitted a draft assessment order under Section 144B to the I AC and completed the assessment in accordance with the directions issued by him. According to the assessee, the provisions of Section 144B are not applicable to an assessment made, pursuant to the provisions of Section 147.

Considering the controversial nature of this contention, and the fact that certain Benches of the Tribunal have also accepted such a contention in certain cases, and also the far reaching importance of the decision on this issue, the Bench considered it desirable that the matter should be placed before a Special Bench of the Tribunal. On a reference being made by it under Section 255(3) of the Act, the President of the Tribunal has constituted this Special Bench to consider and decide the issue, whether the provisions of Section 144B would apply to a reassessment made in pursuance of the provisions of Section 147.

2. As the legal issue, as stated earlier, is of considerable importance, certain other assessees have also participated in the arguments before this Bench, through their, authorised representatives, as interveners, to assist the Bench in coming to a decision. On the request of the learned representative of the assessee, Shri R.Ganeshan, Shri N.K.P. Salve, the learned representative of the intervener Shakti Trading Co. Ltd., Bombay, was allowed to advance his arguments on this issue, first.

3. Shri Salve argued that Section 144B, in terms, applied only where an assessment is to be made under the provisions of Section 143(3) of the Act. That section did not make any mention of an assessment under Section 147. He pointed out that assessments under Section 143(3) and under Section 147 are conceptually and procedurally different from each other. An assessment under Section 143(3), according to Shri Salve, concerned itself only with disputed additions to income or disallowances of expenditure, whereas an assessment under Section 147 concerned itself with income which had escaped assessment. Thus, it was submitted, the area of dispute in these two types of assessments is different. He further pointed out that the conditions under which these two types of assessments could be made were also different. An assessment under Section 143(3), it was pointed out, was as a result of a return tiled under Section 139(1) or under Section 139(2) of the Act, whereas the assessment under Section 147 could be made only on the basis of a return filed in response to a notice issued under Section 148, consequent on the satisfaction of the ITO, that income has escaped assessment, etc. The pre-requisites for the issue of notices under Section 139(2) and under Section 148 are, it was submitted, also different. Another point which was stressed by Shri Salve, to bring home the difference and to show that an assessment under Section 147 is different and distinct from an assessment under Section 143(3), is that Section 246 of the Act provides for an appeal, separately, against an order under Section 143(3) and an order under Section 147. The rules of limitation applicable to assessments under Section 143(3) and Section 147 are also different.

4. Shri Salve went on to argue that though Section 2(8) of the Act defines "assessment" as including reassessment, the said definition will not, automatically, make an assessment under Section 147 an assessment under Section 143(3). In this connection, he referred to the definition of "regular assessment." in Section 2(40) of the Act, according to which the term means "the assessment made under Section 143 or Section 144". This definition, according to Shri Salve, gave a distinct character to an assessment made under Section 143 as against an assessment under Section 147, which is not regarded as a regular assessment. If an assessment under Section 147 is also to be regarded as an assessment under Section ,3(3) or under Section 144, the definition of "regular assessment" would also have included such an assessment. He went on to observe that Section 147, in itself, is an assessment section. It not only gives the ITO *.he jurisdiction to reopen an assessment but also provides the machinery for making the assessment. Though Section 148 of the Act stipulates that before making an assessment or reassessment or recomputation under Section 147, the ITO shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139 and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section, Shri Salve observed that a notice so issued did not become a notice under Section 139(2) and the assessment completed by the application of the provisions of the Act, so far as they may be applicable, did not become an assessment under Section 143(3) or 144.

He referred to various provisions in the Income-tax Act such as Section 152(2), Section 246(1)(e), etc., of the Act, where an "order of assessment, reassessment or recomputation under Section 147" is referred to and submitted that this would show that the Legislature had clearly intended that assessments or reassessments made in accordance with the provisions of Section 147 should be regarded as distinct and separate from assessments made under Section 143(3) or 144. He also pointed out that the Indian Income-tax Act, 1922 ("the 1922 Act") did not provide for a separate appeal against assessment or reassessment under Section 34 of that Act. It was by judicial decisions, that it was clarified that the term "assessment" would include reassessment also and, consequently, an appeal against an assessment or reassessment under Section 34 would also lie under Section 30 of the 1922 Act, even though it was not specifically enumerated in that section, among the appealable orders. However, Shri Salve pointed out, a specific provision for appeal against an order of assessment, reassessment or recomputation under Section 147 has been provided in Section 246(1)(e).

This, according to him, would show that the scheme of Section 34 of the 1922 Act, and of Section 147 of the 1961 Act, are different.- He submitted that there was even a difference in the language used in the two sections. Section 34 provided that the ITO may, within the time limited in that section, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation* allowance, etc., etc. Section 147, on the other hand, provides that the ITO may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, etc., etc. Shri Salve drew our attention to the difference in the words used, namely, "proceed to assess or reassess" and "assess or reassess" as used in the 1922 Act and the 1961 Act. In the light of this difference in phraseology, he contended that an assessment or reassessment in pursuance of the provisions of Section 147 is only an assessment under Section 147 and not an assessment under Section 143(3). He further stated that even if there are defaults committed by an assessee in the matter of filing of return or complying with notices under Section 142(1) or' 143(2), in the course of such proceedings, such defaults could not result in an ex parte assessment under Section 144, as the assessment could be completed only under Section 147. The fact that the Commissioner's powers of revision under Section 263 did not extend to an assessment made under Section 147 was also referred to by Shri Salve as indicative of the difference in the nature of the two assessments. He also referred to the wording of Sub-section (2) of Section 33B of the 1922 Act, which lays down that no order of revision could be passed by the Commissioner to revise an order of reassessment made under the provisions of Section 34. The corresponding provision in Section 263(2) lays down that no order of revision shall be passed by the Commissioner to revise an order of reassessment made under Section 147. According to him, this difference in the wording is quite significant and could not be lost sight of. In order to further bring out the difference between the assessments under Section 143(3) or Section 144 and assessments or reassessments under Section 147, he referred to the decision of the Punjab and Haryana High Court in Smt.

Kamla Vati v. CIT [1978] 111 ITR 248, according to which only assessments made under Section 143(3) or Section 144 could be described as a regular assessment and an assessment made under Section 147 could not be so regarded. We may, at once, point out that a contrary decision has been given by the Calcutta High Court in Kashiram Tea Industries Ltd. v. ITO [1981] 132 ITR 783. Reference was also made to the decision of the Calcutta High Court in Surajmal Ganeshram v. CIT [1979] 120 ITR 715, which only points out that for purposes of appeal, an assessment or reassessment under Section 147 is treated in a separate category distinct from assessments made under other sections or provisions, inasmuch as, there is a separate provision for appeal against an order under Section 147. However, the High Court went on to point out that in an assessment under Section 147, the same procedure or machinery for making assessment under Section 143 or 144 is to be followed. It will be seen that this observation of the High Court would negative Shri Salve's contention that Section 147 provides the jurisdiction as well as the machinery for making the assessment under Section 147 and that it is a self-contained provision.

5. Reference was next made to the decision of the Bombay High Court in Deviprasad Kejriwal v. CIT [1976] 102 ITR 180 in which the High Court pointed out that when a reassessment starts with a notice under Section 34, all the relevant provisions of the Act apply as effectively as where an assessment starts with notice under Section 22(1). Shri Salve sought to distinguish this decision on the ground that this was a decision given under the provisions of the 1922 Act, which, according to him, are materially different from those of the 1961 Act.

6. Referring to the decision of the Supreme Court in V. Jaganmohan Rao v. CIT [1970] 75 ITR 373, according to which the entire assessment is thrown open once a notice under Section 34 is served, and the previous under-assessment is set aside and the whole assessment proceedings start afresh, and the ITO has not only the jurisdiction but also the duty to levy tax on the entire income, that has escaped assessment during the year, Shri Salve again pointed out that this was a decision given under the 1922 Act and the observations of the Supreme Court are widely stated therein. In support of his contention, he referred to a decision of the Bombay High Court in New Kaiser-i-Hind Spg. & Wvg. Co.

Ltd. v. CIT [1977] 107 ITR 760, in which the High Court held that in a reopening of an assessment under Section 34(1)(a), income escaping and assessable under Section 34(1)(6) could not be assessed.

7. Shri Salve referred to the legislative history of Section 144B as given at page 2382 of the Golden Jubilee Edition (11th Edition) of V.S.Sundarants Law of Income-tax in India ; the recommendations of the Wanchoo Committee which led to the introduction of the Taxation Laws (Amendment) Bill, 1973 ; the provisions relating to Section 144B contained in Clause 45 of the Bill and the subsequent modification of the section by the Select Committee, entailing a basic change in the scheme of the section. It was pointed out that the section was introduced as a beneficial measure, to reduce the area of dispute between the department and the assessee, at a pre-assessment stage. The section sought to give the assessee an opportunity of knowing the additions or disallowances proposed to be made by the ITO through a draft assessment order and the assessee had the opportunity of putting forward his objections against the proposed additions or disallowances within 7 days of the receipt of the draft assessment order or within the extended period of 15 days, if allowed by the ITO. Thereafter, these objections were to be considered by a senior officer, namely, the IAC, who could issue such directions as he thinks fit, for the guidance of the ITO, on the matters covered by the objections, to enable him to complete the assessment. The section also provided that no directions, which are prejudicial to the assessee shall be issued by the I AC under Section 144B, before giving an opportunity to the assessee of being heard. Thus, Section 144B was designed to act as a check on arbitrary and high-pitched assessments which might be made by the ITO. According to Shri Salve, this provision was not meant to be extended to the assessment of concealed or escaped income under Section 147. Thus, according to him, the ITO was not entitled to prepare a draft assessment order and to submit the same along with the assessee's objections, to the IAC under the provisions of Section 144B, if the assessment is to be made under Section 147.

8. Arguing for the assessee before us, Shri Ganeshan, the learned Chartered Accountant, also reiterated that assessments made under Section 143(3) and assessment or reassessment under Section 147 constitute different types of assessments. He did not agree with the very broad proposition put forward by Shri Salve that no assessment under Section 147 could fall within the category of regular assessment.

According to him, an assessment which is made for the first time under Section 147 would also answer the definition of "regular assessment".

Only reassessments made under Section 147 would be excluded from the scope of the definition. He agreed that after the issue of the notice under Section 148, the machinery for assessment would be that contained in Sections 142 and 143. The computation of tax will be governed in such a case by the provisions of Section 152(1). He noticed a slight difference in the wording used in Section 143(3) and Section 152(1) regarding the computation of tax. While Section 143(3) speaks of the determination of the "sum payable" by the assessee or refundable to him, Section 152(1) lays down that "...the tax shall be chargeable at the rate or rates/etc.. . ". Shri Ganeshan referred to the definition of "regular assessment" in Section 2(40) as meaning an assessment made under Section 143 or Section 144. Applying the converse, he submitted that every assessment under Section 143(3) has to be a regular assessment and since an assessment under Section 147 could be a reassessment also, it could not be a regular assessment or, in other words, an assessment under Section 143(3). He also touched upon the following differences between an assessment under Section 143(3) and Section 147, namely : 1. Section 147 is only intended for the purpose of roping in escaped income. A loss return need not be acted upon and the loss need not be determined under that section even in a first assessment, whereas in an assessment under Section 143(3), the ITO is bound to determine the loss.

2. In proceedings under Section 147, the assessee could not reopen items decided in the first assessment at the instance of the assessee.

3. Issues already settled in the original assessment could not be reopened at the instance of the assessee.

He then referred to the arrangement of the sections and pointed out that Section 144B appeared after Sections 143 and 144, but before Section 147. From the circumstances, he sought to argue that Section 144B was not intended to apply to an assessment under Section 147. His contention was that if Section 144B was to apply to assessments under Section 147, those provisions would have been placed in the Act after Section 152. Another objection, which was raised by Shri Ganeshan was that though Section 144B was introduced with effect from 1-1-1976, the Board's notification fixing the amount of variation (Rs. 1 lakh), which would confer jurisdiction upon the ITO, was issued on 23-12-1975, i.e., before the section itself was introduced. This, according to Shri Ganeshan, was illegal. He then proceeded to advance arguments on the validity of the reopening of the assessment in this case and also on the merits of certain additions made by the ITO. We shall advert to these arguments, at a later stage in this order, after dealing with the prime issue before this Bench, namely, the applicability of the provisions of Section 144B to a reassessment under Section 147.

9. Shri M.S. Syali, appearing for the intervener Frick India Ltd., New Delhi, made only one submission, namely, that, for the purpose of Section 144B a distinction should be made between a first assessment and a reassessment under Section 147. According to him, Section 144B should not at all apply to an assessment or reassessment under Section 147. In advancing this argument, he agreed with the submissions made by Shri Salve and disagreed with the submissions of Shri Ganeshan.

10. Replying to the arguments advanced by Shri Salve and Shri Ganeshan, the learned departmental representative, Shri C.V. Gupte, referred to the definition of "assessment" in Section 2(8) of the 1922 Act as including reassessment. He also referred to the commentary on this definition appearing at page 36, volume 1, 7th edition, of Kanga and Palkhivala's The Law and Practice of Income-tax, according to which, the definition gives statutory effect to the decision of the Supreme Court in A.N. Lakshman Shenoy v. ITO/ITO v. City Tobacco Mart [1958] 34 ITR 275. He also referred to the commentary appearing at page 149, Volume I, Golden Jubilee Edition (11th Edition) of V.S. Sundaram's Law of Income-tax in India, in which the learned author has pointed out that the Mysore High Court had held in City Tobacco Mart v. ITO [1955] 27 ITR 549 that the expression "assessment" did not include reassessment. This view compelled the Law Commission to suggest the definition that "assessment" includes reassessment. However, the Supreme Court held in the case of A.N. Lakshman Shenoy v. ITO/ITO v.City Tobacco Mart (supra) that the word "assessment" would include reassessment. Thus, the definition, as it appears in Section 2(8), is in accord with the decision of the Supreme Court.

11. Shri Gupte went on to point out that both Section 144B and Section 147 appear in Chapter XIV, which deals with "Procedure for assessment".

As assessment includes reassessment, by definition, he submitted that the procedure authorised in the Chapter applies to reassessments also.

Besides, when Section 147 specifically lays down that the "provisions of this Act shall, so far as may be, apply", the provisions of Section 144B are also clearly intended to apply to an assessment under Section 147. Referring to the arguments advanced from the other side, based on the definition of "regular assessment" contained in Section 2(40), Shri Gupte pointed out that it is totally irrelevant to consider that definition in the context of an assessment under Section 147 in relation to Section 144B. That definition is relevant only in the context of Chapter XV ITC relating to the charging of interest.

Referring to Shri Ganeshan's argument that Section 144B will not apply to assessments or reassessments under Section 147, in view of its placement before Section 147, Shri Gupte pointed out that if that logic is applied, even Section 142(1) or 143(2) will not apply to assessments under Section 147. Such a state of affairs is clearly unintended, when Section 148 clearly lays down that all the provisions of the Act, insofar as may be, will apply. Shri Gupte went on to point out that Section 147 is not a charging section but is only a machinery section.

In this context, he referred to the commentary appearing at page 895, volume I, 7th edition, of Kanga and Palkhivala's The Law and Practice of Income-tax, in support of this submission. Once a notice under Section 148 is issued, after reopening an assessment under Section 147, the assessment has to be made either under Section 143(3) or Section 144. In support of this contention, he referred to the commentary appearing at pages 1706/1707, volume II, 2nd edition, of Chaturvedi and Pithisaria's Income-tax Law. Once it is held that an assessment or reassessment pursuant to Section 147 is to be completed under Section 143(3) the provisions of Section 144B would also become applicable to such an assessment. He submitted that Section 144R has amended the law relating to assessment procedure and such amended procedure would also apply to an assessment to be made under Section 147. Referring to the time limit for completion of assessments and reassessments, dealt with in Section 153, he pointed out that Explanation 1 provided for the exclusion of certain periods in computing the period of limitation for the purposes of that section. Sub-clause (iiv) of the Explanation deals with the exclusion of the period, not exceeding 180 days, commencing from the date on which the ITO forwards the draft under Section 144B(1) to the assessee and ending with the date on which the ITO receives the directions from the IAC under Sub-section (4) of Section 144B, or the exclusion of a period of 30 days where no objections to the draft order are received from the assessee. Shri Gupte's submission was that since the Explanation stipulates that the exclusions mentioned in Clauses (i) to (v) thereof had to be taken into account in computing the period of limitation for the purposes of Section 153, Sub-clause (iv), thereof will apply to Sub-section (2) of Section 153 dealing with orders of assessment, reassessment or recomputation under Section 147, also.

Section 144B, it was submitted, was purely a procedural provision, intended to lessen the hardship of the assessees and such a procedure will apply to all assessments which are ultimately made under Section 143(3). Referring to Shri Salve's argument that assessments under Section 143(3) and under Section 147 are conceptually and procedurally different, Shri Gupte submitted that this is not so and that the provisions of Section 143(3) and Section 147 dovetail into each other.

With regard to the provisions of Section 263, which do not permit the Commissioner to exercise his revisionary powers in respect of reassessments under Section 147, Shri Gupte submitted that this is because, before taking action under Section 147, the ITO has generally to take the approval of either the Commissioner or the Central Board of Direct Taxes. Referring to Shri Salve's reliance on the decision of the Calcutta High Court in Surajmal Ganeshram v. CIT (supra) in which the High Court has pointed out that for purposes of an appeal, an assessment or reassessment under Section 147 is treated in a separate category, distinct from assessments made under other sections, Shri Gupte pointed out that such a distinction existed only in respect of the right of appeal. In the circumstances, he wound up his argument with the statement that the assessment under Section 147 being also an assessment under Section 143(3), the provisions of Section 144B would be rightly applicable, where the disputed addition exceeded the limit notified by the Central Board of Direct Taxes.

12. Arguing for the department, the learned counsel, Shri T.R.Ramachandran, referred to the legislative history of Section 144B, starting with the recommendations of the Wanchoo Committee, Clause 45 of the Taxation Laws (Amendment) Bill, 1973, the notes and comments on the clauses appearing in [1973] 89 ITR (St.) 33, the Select Committee Report on the said Bill in [1975] 99 ITR (St.) 19 and culminating in the Taxation Laws (Amendment) Bill, 1973, as reported by the Select Committee appearing at pages 46 to 126 thereof. The original scheme, as proposed in the Bill, was that Deputy Commissioners of Income-tax (posts which were not created as recommended by the Wanchoo Committee), would make the assessments in those cases, where the ITO submits the draft assessment order and the assessees object to the additions or disallowances proposed therein. The Select Committee recommended that, instead of the assessments being taken away from the ITO, in such cases, the IAC to whom draft assessment orders are submitted by the ITO should, on receipt of the objections, if any, from the assesssee, issue directions to the ITOs in respect of matters covered by the objections and, thereupon, the assessments should be completed by the ITOs themselves. Referring to Shri Salve's argument regarding the change in concept of the provisions of Section 144B in the Bill, as originally proposed, and as reported by the Select Committee, Shri Ramachandran pointed out that though there is a change in the wording of the section, as a result of the Select Committee's deliberations, the Select Committee did not suggest that the operation of the section should be restricted only to original assessments made under Section 143(3). Referring to the scope of Section 147, he argued that this section was intended only to displace finality of assessments in those cases, where income has escaped assessment or has been under-assessed, etc., and to clothe the ITO with the jurisdiction or power to reopen such assessments, under certain pre-conditions. Without such a provision, assessments would become final even if no assessment had been made initially or if the initial assessment was an under-assessment. Beyond giving power to the ITO to reopen such assessments, Section 147, according to Shri Ramachandran, did not contain provisions within itself for the completion of an assessment.

The power to reassess under Section 147 is subject to the provisions of Sections 148 to 153. He pointed out that Section 48 specified the procedure, which was mandatory and compulsory in nature. The only deeming provision in Section 148, according to him, was that a notice issued under that section was to be treated as a notice issued under Section 139(2). The other provisions, such as Sections 142, 143, etc., are not deemed to apply but, in fact, and in law, apply and are mandatorily applicable to such assessments. The words in Section 147, "he may ... assess or reassess such income or recompute the loss ..." only refer to a conferment of power on the ITO to make an assessment, such assessment necessarily to be made under Section 143(3) or 144.

13. Referring to the argument from the side of the assessees that the distinct and separate nature of an assessment under Section 147 finds recognition in Section 246, where separate provision is made for an appeal against an order under Section 143(3) and an appeal against an order under Section 147, Shri Ramachandran submitted that there was no such separate provision when the Income-tax Bill, 1961, was originally presented before the Parliament. The Law Commission did not consider it necessary to make any such provision in the Bill. When the Bill went to the Select Committee, they expressed the opinion that in order to remove any possible doubt, an order of assessment, reassessment or recomputation under Section 147 or Section 150 should be specifically referred to in Section 246. Shri Ramachandran pointed out that this was a provision made, out of abundant caution, in order to remove any possibility of doubt. Even without such a provision, such an order would have been appealable as, in fact, such orders were appealable under the Indian Income-tax Act, 1922, without a corresponding provision in Section 30 thereof. He also submitted that the word "assessment" is used in a loose sense in Sections 147, 150 and 246(1)(e). To illustrate this, he referred to Section 150, which does not deal with any assessment, but only deals with the issue of a notice under Section 148, "for the purposes of making an assessment or reassessment or recomputation, in consequence of or to give effect to any finding or direction contained in an order passed by any authority ... by way of appeal, reference or revision". Even so, Section 246(1)(e) refers to an order of assessment, reassessment or recomputation under Section 147 or Section 150. He also referred to the decisions of the Supreme Court in V. Jaganmohan Rao v. CIT (supra) and CST v. H.M. Esufali H.M. Abdulati [1973] 90 ITR 271, in support of the argument that in proceedings under Section 147, the original assessment stands set aside and the reassessment is nothing but a fresh assessment. Such an assessment has to be completed only under the provisions of Section 143(3) or 144. When the assessment is made under Section 143(3), in such circumstances, the provisions of Section 144B would also apply if there are disputed additions or disallowances exceeding the limit laid down by the Central Board of Direct Taxes. He also repeated the plea that the expression "assessment" includes reassessment.

14. Replying to the arguments advanced on behalf of the department, Shri Ganeshan argued that the question to be considered is whether the words used in Section 144B should be understood in the context of Sections 2(8) and 2(40), namely, the definitions of "assessment" and "regular assessment". He pointed out that the decision of the Calcutta High Court in Kashiram Tea Industries Ltd, v. ITO (supra), in which there are observations to the effect that a reassessment, on reopening under Section 147, will be under Section 143 or Section 144 and that such an assessment also will be a "regular assessment" within the meaning of Section 2(40), has not found favour with the Delhi High Court which has held that "regular assessment" refers only to the first or the initial regular assessment and not to subsequent modifications thereof-National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928. He also refuted Shri Gupte's suggestion that Explanation 1 to Section 153 applied to the section us a whole, including Sub-section (2). The five clauses of the Explanation applied to live different situations and, according to him, Clause (iv) did not apply to Sub-section (2) of Section 153.

15. We have considered the detailed and elaborate arguments advanced from both sides. The main reasons advanced on behalf of the assessee in support of its contention that the application of the provisions of Section 144B to an assessment or reassessment under Section 147 is illegal are the following : 1. Section 144B contemplates the preparation of a draft assessment order and inviting the objections of the assessee to the additions proposed therein, only in an assessment to be made under Section 143(3). It does not mention the applicability of that section to an assessment to be made under Section 147.

2. An assessment under Section 147 is distinct and different from an assessment under Section 143(3), as will be evident from the fact that an assessment under Section 147 is specifically referred to in Sections 147, 148, 153(2), 246(1)(e), etc. Hence, Section 144B does not apply to such an assessment or reassessment under Section 147.

3. The scheme, the subject-matter and the field of operation of assessments under Section 143 and under Section 147 are different.

4. Section 147 is a self-contained section which not only enables the ITO to reopen an assessment but also lays clown a complete machinery for the making of an assessment or reassessment under that section.

5. The fact that, an assessment under Section 143(3) and an assessment or reassessment under Section 147 are different is also evident from the fact that appeals against such orders are separately provided for in Sections 246(1)(c) and 246(1 )(d).

16. There can be no manner of doubt that the provisions of Sections 139 to 143, culminating in an assessment under Section 143(3) or Section 144, and the provisions of Section 147, read along with Sections 148 to 153, operate and are, indeed, intended to operate in different fields.

Section 139 deals with returns of income to be filed by an assessee either voluntarily or in response to a notice issued by the ITO under Section 139(2). These provisions apply to the assessments to be made in the normal course in any financial year, in respect of the previous year of an assessee, immediately preceding such financial year. The time limit for making such assessments in the normal course is two years from the end of the assessment year, in which the income was first assessable, where such assessment year is an assessment year commencing on or after 1-4-1969. There may be instances in which, either due to a default on the part of the assessee to file a return of income under Section 139 or for any other reason, income which is chargeable to tax escaped assessment. There may also be instances where, owing to the failure of the assessee to disclose fully and truly all material facts necessary for his assessment, income chargeable to tax escapes' assessment. Section 147 deals with the latter type of cases where income has escaped assessment during the relevant assessment year and it becomes necessary either to assess or reassess such income. Assessment of such income would arise where no return had at all been filed earlier and no assessment had been made on the assessee. Reassessment will become necessary where an earlier assessment had been made, but income chargeable to tax has escaped such assessment. It will be obvious that Sections 139 to 143, being in relation to a normal assessment, and Section 147 operate in two different fields.

17. However, it will not be correct to say that Section 147 is a self-contained section, which not only confers on the ITO the jurisdiction to assess or reassess escaped income but also contains the procedure for making such assessment. The section itself states, in specific terms, that when the conditions enumerated in that section exist, the ITO may, subject to the provisions of Sections .148 to 153 assess or, reassess such income, etc. Thus, while Section 147 gives the jurisdiction and the power to the ITO to reopen an assessment, Sections 148 to 152 lay down the procedure and the machinery for making such an assessment or reassessment and Section 153(2) lays down the time limit within which such an assessment or reassessment could be made.

18. But even the provisions of Section 148 are not self contained. That section postulates that a notice containing all or any of the requirements, which may be included in a notice under Sub-section (2) of Section 139, shall be served on the assessee before making the assessment, reassessment or recomputation under Section 147 and the provisions of this Act shall, so far as may be, apply accordingly as if the notice, were a notice issued under that sub-section. It will be seen that Section 148 introduces a fiction, whereby a notice issued under that section is to be treated as a notice issued under Section 139(2). However, the latter part of the section, wherein it lays down that the provisions of the Act shall, so far as may be, apply accordingly, does not contain any fiction. It does not say that the provisions of this Act shall, so far as may be, deemed to apply accordingly, but states categorically that those provisions shall apply accordingly. The consequences flowing from the fiction contained in Section 148 have to be carefully examined. Where the notice issued under Section 148 is to be deemed as a notice issued under Section 139(2), the consequences are that the assessee is required to file a return of his income, in response to that notice, within the time limited therein. Secondly, on being required by the ITO, under the provisions of Section 142(1), to produce or cause to be produced such accounts or documents as the ITO may require or to furnish in writing and verified in the prescribed manner information on such points or matters as he may require, the assessee is bound to comply with those requirements. The ITO may either accept the return filed by the assessee, without requiring his presence, as laid down in Section 143(1), or may require the assessee to produce evidence in support of his return under Section 143(2). In case of failure on the part of the assessee to comply with the requirements relating' to the filing of a return or the requirements under Section 142(1) or Section 143(2), the ITO can complete the assessment to the best of his judgment under Section 144. If the assessee complies with all the requirements, the ITO will complete the assessment under Section 143(3). These are not assessments deemed to be made under Section 144 or under Section 143(3) but are in, fact and in law, assessments made under those sections Thus, though the assessments or reassessments may have been initiated under Section 147, they are invariably completed under Section 143 or 19. It is now well settled that in construing the scope of a legal fiction, it is not only proper but also necessary to assume all those facts on which alone the fiction can operate. In this connection, reference may be made to the decision of the Supreme Court in CIT v. S.Teja Singh [1959] 35 ITR 408 and in particular to the following oft-quoted observations of Lord Asquith in East India Dwellings Co.

Ltd. v. Finsbury Borough Council [1952] AC 109 quoted therein : If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably, have flowed from or accompanied it.... The statute says that you must imagine a certain state of affairs : it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. (p. 413) Thus, where Section 148 introduces the fiction that the notice issued under that section is to be deemed to be a notice under Section 139(2), the logical consequence, when the section does not say that the other provisions of the Act shall be deemed to apply, is that the other provisions apply in the same manner as in a normal or regular assessment and the resultant assessment is one, which is made either under Section 143(3) or Section 144.

20. The question might then arise as to why the assessment or reassessment made in pursuance of the provisions of Section 147 is described as an assessment or reassessment under Section 147. The reason, according to us, is quite obvious. It is only to distinguish such an assessment from a normal assessment under Section 143(3), because of the different conditions for the assumption of jurisdiction, different time limits, different consequences that flow from the assessment, etc. As stated earlier, these assessments operate under different conditions and there are different consequences attaching to assessments made in the normal course and the assessments or reassessments made as a result of an action under Section 147. The distinction has necessarily to be kept in view. Instead of describing such assessments, in a lengthy and cumbersome way as "assessment or reassessment under the provisions of Section 147 read with Section 143(3)/144", at every place, wherever it is relevant, the simpler and more direct form of describing the assessment as an assessment or reassessment under Section 147 has been resorted to, for the sake of lucidity and simplicity. It is more in the nature of a description of the assessment, for the purposes of identification, then a negation of the fact that even such an assessment is completed under Section 143(3) or 144.

21. Another factor, which has been relied upon very heavily, from the side of the assessee in contending that an assessment under Section 147 is not an assessment completed under Section 143(3), is the provision relating to appeals contained in Section 246, namely, Sections 246(c) and 246(e) [subsequently enacted as Sections 246(1)(e) and 246(1)(e) by the Finance (No. 2) Act, 1977]. Section 246(c) provides for an appeal against an order passed by the ITO under Section 143(3) or Section 144 whereas Section 246(e) provides for an appeal against an order of assessment, reassessment or recomputation under Section 147 or Section 150. The argument advanced from the side of the assessee is that if an assessment under Section 147 is also to be regarded as an assessment under Section 143(3) or Section 144, the Legislature would not have enacted separate provisions for appeals against such orders. Since, this argument does create some doubt regarding the scope and content of those provisions, we have considered it permissible to look at the report of the Select Committee which recommended the enactment of Clause (e). In doing so, we are guided by the precedent contained in Pt. Lakshmi Kant Jha v. CWT [1968] 69 ITR 545 (Pat.), (observations at pages 550/551). Their Lordships of the Patna High Court have pointed out therein that the strict rule of British Law that the history of legislation and the reports of the Select Committee preceding the passing of a Bill should not be looked into for the purpose of construing statutes has not been followed in some of the recent decisions of their Lordships of the Supreme Court. On the other hand, they have followed the American view referred to by Crawford's Statutory Construction at page 382, where a distinction was made between legislative debates on the one hand and reports of the legislative committees on the other. It was pointed out that though debates may be inadmissible for the purposes of construction, the reports of the committees, "do possess a more reliable or satisfactory source of assistance". Their Lordships have also referred to instances where the reports of the Joint Select Committee or of the Drafting Committee have been called to aid by the Supreme Court in interpreting the provisions, which were ambiguous. In the above background, the following extract from the report of the Select Committee appended to Clause 246 (later on enacted as Section 246), is illuminating : "The Committee are of the opinion that in order to remove any possible doubt, an order of assessment, reassessment or recomputation under Clause 147 or Clause 150 should be specifically referred to in this clause." [Emphasis supplied.] In this connection, it has to be pointed out that in the original Income-tax Bill, 1961, there was no such separate provision for an appeal against an order under Section 147. In fact, there was no such provision in Section 30 of the Indian Income-tax Act, 1922, in relation to appeals against assessment or reassessment under Section 34 of that Act. Even so, there has never existed any doubt that the provision relating to appeals against assessments also applied to appeals against assessments or reassessments under Section 34. It was for this reason that the Law Commission did not provide separately for an appeal against an order under Section 147. However, for the sake of removal of any possible doubt, the Select Committee considered it advisable to provide separately for such an appeal. It will be clear from this, that the provision contained in Section 246(1 )(e) is only a measure introduced out of abundant caution, is in the nature of a clarification of existing rights of appeal, and did not create any separate or previously non-existent right of appeal against an assessment or reassessment under Section 147. In our view, much support could not be drawn by the assessee from this provision, for the contention that an assessment or reassessment under Section 147 is not an assessment made under Section 143(3) or Section 144.

22. Another argument, which was pressed into service, on behalf of the assessee, in support of the contention that Section 147 was not a machinery section but was a substantive and self-contained provision for assessment, was the apparent difference in phraseology between Section 34 of the 1922 Act and Section 147 of the 1961 Act. The argument was that Section 34 of the 1922 Act, after setting out the conditions under which the assessments may be reopened, provided that the ITO, "may in cases falling under Clause (a) at any time and in cases falling under Clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section." [Emphasis supplied.] In Section 147, on the other hand, the corresponding provision, it was pointed out, was as follows : (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or He may, subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 14H to 153 referred to as the relevant assessment year).

It was pointed out that, while in Section 34, the wording used is "may proceed to assess or reassess", the wording used in Section 147 is, "may assess or reassess such income". From the above difference in the wording of the two sections, it was argued that while Section 34 was a machinery section, because of the use of the words "may proceed to assess", Section 147 was a substantive assessment section, because of the use of the words "may assess or reassess". It may be mentioned in this connection that it has already been held that Section 34 of the 1922 Act does not impose any charge on the subject but deals merely with the machinery of assessment-Bhimraj Fauna Lal v. CIT [1957] 32 ITR 289 (Pat.) affirmed m Bhimraj Pannalal v. CIT [1961] 41 ITR 221 (SC).

It is also now well settled that in interpreting such machinery provisions, the rule is that that construction should be preferred which makes the machinery workable-CIT v. Mahallram Ramjidas [1940] 8 ITR 442 (PC) and India United Mills Ltd. v. CEPT [1955] 27 ITR 20 (SC).

It is to tide over the decision that Section 34 is a machinery section, that the learned counsels for the assessees have contended that there is a difference in the wording between that section and Section 147.

23. In our view, the difference in wording, pointed out above, is due to the historical necessity of having to split: up Section 34 of the 1922 Act into several sections, such as Sections 147 to 153 of the 1961 Act. As will be seen from a reading of Section 34, the procedure for assessment, after issue of the notice under that section was indicated in that section itself, and hence the section enjoined upon the ITO to proceed to make the assessment accordingly. While splitting up that section into Sections 147 to 153, the procedure for the assessment or reassessment was engrafted in Sections 148 to 152. Thus, in Section 147 the Legislature provided that the ITO may assess or reassess the income, subject to the provisions of Sections 148 to 153. If these sections are read as a whole, and in proper context, it will be seen that there is no real difference in content, as between Section 34 of the 1922 Act and Section 147 of the 1961 Act and the alleged difference in phraseology is merely illusory.

24. As Section 34 has already been held to be a machinery section, as pointed out supra, it follows that Section 147 also is only a machinery section, which enables the ITO to reopen an assessment which has already been completed or to bring to charge, for the first time, income which has escaped assessment. The assessment itself has to be completed either under Section 143(1) or Section 143(3) or under Section 144, depending upon the circumstances of the case.

25. One other reason, which is also, according to the assessee a very strong reason for not applying the provisions of Section 144B to an assessment or reassessment under Section 147 is that that section, in terms, applies only to an assessment to be made under Section 143(3).

As we have observed earlier, an assessment under Section 147, if made under Section 143(3) would also become the subject-matter of the procedure laid down in Section 144B. There could be no doubt that Section 144B is a procedural section, as has been held by the Madhya Pradesh High Court in Banarsidas Bhanot & Sons v. CIT [1981] 129 ITR 488. The scope and purport of this section has been summarised by the Hon'ble High Court in the following terms : The issuance of a draft assessment order as required by Section 144B of the Income tax Act, 1961, is not necessary to clothe the Income-tax Officer with jurisdiction to make the assessment. The Income-tax Officer has jurisdiction to make the assessment under Section 143. Section 144B provides for a special procedure to be followed in cases where the variation in the income or the loss returned which is prejudicial to the assessee exceeds the amount fixed by the Board, i.e., Rs. 1 lakh. In such a case, a draft assessment order is required to be served on the assessee and if the assessee takes objection within seven days, the Income-tax Officer has to seek the directions of the Inspecting Assistant Commissioner by forwarding the draft order and the objections to him. A direction issued by the Inspecting Assistant Commissioner for the guidance of the Income-tax Officer is binding on him and he has to complete the assessment in the light of such direction.

The object behind the provision for a draft assessment order is to give a comprehensive opportunity to the assessee to object to the proposed variations in the income or loss returned by the assessee.

Whether a defect in the draft order is fatal to the assessment has to be decided having regard to the object behind the issuance of the draft order. A draft order of assessment, like the final order of assessment, should contain the quantification of the total income but the omission to quantify the total income in every case will not nullify the assessment if no prejudice was caused to the assessee.

(p. 488) 26. According to the arguments put forward on behalf of the assessee, the specific mention of "assessment to be made under Section 143(3)" creates serious doubts about the applicability of this procedural provision to an assessment under Section 147. It is, therefore, necessary for us to consider the proper interpretation to be placed on the provisions of this section.

27. In interpreting a procedural or machinery section, it is now well settled that it should not be subjected to a rigorous construction but should be construed in a way that makes the machinery workable-see CIT v. Mahaliram Ramjidas (supra), Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC) and India United Mills Ltd. v. CEPT (supra). Section 144B was introduced by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. It lays down a new procedure, to be followed in those cases where the ITO in making the assessment under Section 143(3) proposes to make any variation in the income or loss returned which is prejudicial to the assessee, and the amount of such variation exceeds a certain limit. It is in the interpretation of the scope of this section that a doubt has been raised. In such a case, the approach suggested by Lord Coke in Heydon's case [1584] 3 Rep. 76 gives useful guidance. According to this approach, it is necessary to get an exact conception of the aim, scope and object of the whole Act, and to consider : (1) what was the law before the new provision was enacted (2) What was the mischief or defect for which the law had not provided (3) What remedy Parliament has appointed. (4) The reason of the remedy.

28. Keeping the above rules of construction in mind, let us now examine the provisions of Section 144B. That section was enacted, pursuant to the following recommendation of the Wanchoo Committee : As regards disputed additions in assessments, a point has been made before us that often decisions are taken by the Income-tax Officer behind the assessee's back and the assessee comes to know of additions and disallowances only after the assessment has been made and an order is received by him. In many cases, the dispute could have been avoided if adequate opportunity had been given to the taxpayer to explain the position. We are aware that such situations do frequently arise. To ensure that the assessee gets a reasonable opportunity of meeting the objections of the Income-tax Officer before an assessment is finalised, we recommend that there should be a provision in the law requiring the Income-tax Officer to send a draft assessment order to the assessee, to start with, in all cases where the additions or disallowances proposed to be made in an assessment order under Sub-section (3) of Section 143 exceed in the aggregate Rs. 25,000. Where the taxpayer objects to the assessment being made on the basis of the draft order, he should intimate his objections within 7 days to the Inspecting Assistant Commissioner who will, after hearing the assessee and the income-tax Officer, pass the final order of assessment himself. For this purpose, the Inspecting Assistant Commissioner should have the power to accept, reduce or enhance the income proposed in the draft order, such a measure will also ensure that major dispute with the taxpayer are settled or dealt with at a level higher than that of the Income tax Officer.

Thus, it will be seen that Section 144B was enacted in order to curb the tendency of the ITOs to make large disallowances or additions, in the course of assessments, without giving assessees a reasonable opportunity of showing cause against such additions or disallowances.

Besides, it was intended to ensure that, before such additions or disallowances are made, the objections of the assessee were considered by a more senior officer, namely, the IAC, who will, after hearing the objections of the assessee, guide and direct the ITO with regard to the proposed additions or disallowances. The Act, as it stood prior to the introduction of this section, did not provide for such pre-assessment guidance by a senior officer, after giving the assessee an opportunity of being heard. Thus, the mischief or defect, for which the law, as it stood, had not provided was that arbitrary or unreasonable additions or disallowances could be made by the ITOs, resulting in avoidable harassment to assessees and vexatious litigation. The remedy that Parliament appointed for this defect was a pre-assessment examination of the disputed issues by a senior officer, namely, the IAC. The reason for the remedy appointed was, as stated earlier, to avoid harassment to assessees and to reduce vexatious litigation.

29. If vexatious additions or unreasonable disallowances could be made only in an assessment under Section 143(3), it stands to reason that Section 144B would apply only to such an assessment and not to an assessment under Section 147. In fact, it was suggested by some of the counsels that Section 144B was not meant to apply to an assessment or reassessment under Section 147 as the approval of the Commissioner or the Central Board of Direct Taxes would already have been taken for reopening the assessment, with reference to the income that has escaped assessment. We do not find merit in this contention. While taking the approval of the Central Board of Direct Taxes or of the Commissioner, for the reopening of the assessment, the ITO is not required to compute the exact amount of income which has escaped assessment. Thus, for instance, if the ITO reports that the assessee was carrying on a business, the income from which was not disclosed by him in the return of income filed by him, at the time of the original assessment, that would be sufficient reason for reopening the assessment. The quantification of the income which has escaped assessment is a matter, which will be considered by the ITO only at the time of completing the assessment or reassessment under Section 147. At the time of making such computation, the ITO could make additions or disallowances and it may also happen that such additions or disallowances are in excess of the limits laid down by the Central Board of Direct Taxes with reference to Section 144B. In such a case, we do not see any logic or reason for holding that such additions or disallowances proposed by the ITO should not be put to the assessee for his objections and that such objections should not be considered by the IAC, even though such assessment also has to be completed under Section 143(3). (We are not considering the contingency of such assessment having to be completed under Section 144, as Section 144B does not, in terms, apply to assessments under Section 144, for very obvious reasons.) 30. Section 144B, being a provision enacted entirely for the benefit of the assessee and with a view to lessening the prospect of harassment in the course of assessment, it will be unreasonable to hold that such a beneficial provision is not applicable to additions and disallowances proposed in the course of an assessment or reassessment, pursuant to the provisions of Section 147. A reasonable construction of the provisions of that section, in the light of the principles laid down in Heydon's case (supra) and in consonance with the general scheme of the Act, would clearly yield the result that the section applies to all assessments made under Section 143(3), whether by way of original assessment or as a result of a reopening of the assessment under Section 147.

31. Before parting with this issue, we would like to point out that we do not see any merit in the contention put forward on behalf of the assessee that as Section 144B appears after Sections 139 to 143, and before Section 147, that section will not apply to assessments or reassessments made under Section 147. That section appears in Chapter XIV, which prescribes the procedure for assessment and Section 148 also postulates that the notice issued under that section will be treated as a notice issued under Section 139(2) and the provisions of the Act shall, so far as may be, apply accordingly, it is clear that the procedure for assessment prescribed in the Chapter would also apply to such an assessment. We also do not find any merit in the contention that as the Board's notification (prescribing the limit of Rs. 1 lakh for disputed additions or disallowances, for the preparation and submission of a draft assessment order), was issued earlier than the date from which Section 144B came into effect, the notification is invalid. The notification was meant to take effect only after the section was enacted and brought into the statute. It was competent for the Board to prescribe the financial limits for the application of such section, as and when it. was enacted. We do not see any infirmity in the notification, on that ground.

32. For the foregoing reasons, we have to hold that the provisions of Section 144B have been rightly invoked in the present case.

33. We shall now deal with the specific contentions raised in this case on the merits of the assessment.

34. The first contention, which was raised by Shri Ganeshan, in challenging the legality and the validity of the reopening of the assessment under Section 147(a), was that there was no failure on the part of the assessee either to file a return of income or to disclose fully and truly all material particulars necessary for the assessment of the assessment year 1967-68. According to him, the question regarding the construction of the property numbered as A-14, NDSE, Part I, and the investment therein was considered by the ITO in the assessment year 1968-69. It was after the AAC held that some of the items of investment related to the assessment year 1967-68 that the ITO took action for reopening the assessment year 1967-68. In this background, he argued that only the provisions of Section 147(6) applied and not Section 147(a). As the ITO has pointed out that the assessee had not disclosed the material particulars relating to either the construction of the property at A-14, NDSE, Part 1 or the sources of funds for the construction thereof in the return of income filed by him for the assessment year 1967-68, the unexplained investments related to the assessment year 1967-68 and as the assessee had not disclosed the material particulars relating thereto, in the course of the original assessment, we agree with the ITO that there was justification for invoking the provisions of Section 147(a).

35. Coming to the merits of the additions made by the ITO, there are two sets of additions, one amounting to Rs. 71,800, being unexplained investment in the construction of the above property, and another amounting to Rs. 52,132, being unexplained investment in the acquisition of certain plots of land. Though in the grounds of appeal, the assessee has assailed the entire addition of Rs. 71,800 in respect of the construction of the property, the objection raised with regard to the unexplained investment in the acquisition of plots is only to the extent of Rs. 15,750 being the investments in the name of Smt.

Jagjit Kaur and Smt. Pritam Kaur, wives of the assessee. The amount of Rs. 71,800 is made up of the following items :- Amount not accepted as proved, out of the sale proceeds of agricultural land in Village Naura 21,800- Amount received from Arjan Singh 31,000- Agricultural income 10,000- Loan received from Smt. Pritam Kaur and Smt. Jagjit Kaur 10,000 --------- With regard to the first of the above items, it was the contention _of the assessee before the authorities below that agricultural lands belonging to the assessee and to his two brothers were sold on 12-8-1966 for Rs. 64,800 and that though only an amount of Rs. 43,000 was deposited in his bank account on 16-8-1966, the entire amount of Rs. 64,800 was available with him for utilisation in the construction of the property. As there was no evidence of the availability of the amount of Rs. 21,800, they accepted the explanation only to the extent of Rs. 43,000. At the time of the hearing of the appeal before us, Shri Ganeshan made a submission that there was a factual mistake in the submission made before the authorities below in this respect. According to him, the amount of Rs. 64,800 represented the sale proceeds of the assessee's one-third share in the agricultural lands and not the total sale proceeds of the entire land. According to him, as the entire amount of Rs. 64,800 belonged to the assessee, that amount was available with him for investment, even though only an amount of Rs. 43,000 was deposited in the bank. He also submitted that this fact will be borne out by the registered deed of sale. Though this fact is submitted before us for the first time, in the interest of justice, we consider that it is necessary to examine the correctness of this submission, namely, that the amount of Rs. 64,800 represents the sale proceeds of the assessee's one-third share of the agricultural land. We would direct the ITO to verify the correctness of this statement and if it is found to be correct, we would also direct him to accept the assessee's explanation in respect of the balance of Rs. 21,800 also.

36. With regard to the other items, namely, the amount allegedly received from Arjan Singh, the alleged loans from Smt. Pritam Kaur and Smt. Jagjit Kaur and the alleged agricultural income of Rs. 10,000, no evidence apart from what was sought to be placed before the authorities below was placed before us. These have been dealt with, elaborately, in the orders of the ITO as well as of the A AC and a perusal of those orders, clearly shows that the assessee has failed to prove the genuineness of these sources. In the circumstances, we do not consider it necessary to deal with those submissions in detail but would agree with the findings of the authorities below and confirm those additions.

37. With regard to the investment in the plots of land, the assessee has assailed the inclusion of the investments of Rs. 10,500 in the name of his wife Smt. Jagjit Kaur and Rs. 5,250 in the name of his divorced wife Smt. Pritam Kaur. It is particularly emphasised that the investment in the name of the divorced wife could not be treated as an investment of the assessee, as he has no dealings with her. At the same time, we find that the assessee has allegedly taken a loan of Rs. 5,000 from that lady in the context of the construction of the property at A-14, NDSE, Part I. Thus, while on the one hand he claims to have taken a loan from her, he denies having any transaction with her, as she is divorced from him, when it comes to explaining the investment in the plots of land. This aspect has also been fully discussed in the orders of the authorities below, which would go to show that the assessee has not been able to explain satisfactorily the sources of funds for the investment in the various plots of land.

38. In the result, subject to the further enquiry regarding the amount of Rs. 21,800 allegedly representing the balance of sale proceeds of the assessee's one-third share in the agricultural land, the other additions made by the ITO, and confirmed by the AAC are hereby confirmed.

40. For statistical purposes, the assessee's appeal will be treated as partly allowed, to the extent indicated above.


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