1. IT Appeal Nos. 588 and 589 are by the assessees and the remaining appeals are by the department. All of them relate to the assessment year 1971-72. The original assessments in all the cases were reopened under Section 147(a) of the Income-tax Act, 1961 ('the Act') and reassessments were made. The AAC upheld the reassessments in the case of the" assessees in IT Appeal Nos. 588 and 589. They have, therefore, come up in appeal. The AAC set aside the reassessments in the remaining three cases and the revenue has come up in appeal.
2. The assessees in these appeals are the legal heirs of Shri A.P.Menon, who died in 1957. He had a landed property at Ernakulam. This was acquired by the Government of Kerala who paid a compensation of Rs. 3,39,473. The capital gains arising out of the acquisition of the property was assessed in the hands of the legal heirs of A.P. Menon during the assessment year 1971-72. A.P. Menon, had two brothers, Kannakutty Menon and Echukutty Menon and three sisters Ambika R. Menon, Devaki Thampuran and Ammalukutty Amma. Kannakutty Menon is no more and he is now represented by his son, Krishnankutty Menon, the assessee in IT Appeal No. 588 and his widow, Kamalam K. Menon (the assessee in IT Appeal No. 589). Shri Echukutty Menon is the assessee in IT Appeal No.38 and the sister Ambika R. Menon is the assessee in IT Appeal No. 39.
Devaki Thampuran is represented by A. Achuthankutty Menon, who is the assessee in IT Appeal No. 37. Echukutty Menon first filed a return on 25-9-1971 with a covering letter, wherein it was stated that the legal heirs of Shri A.P. Menon are Kannakutty Menon, Echukutty Menon, Ambika R. Menon, Devaki Thampuran and the children of Smt. Ammalukutty Amma who had predeceased A.P. Menon. It was, therefore, stated in the letter that the land acquisition compensation amount was divisible into five shares between the brothers and sisters and that each of them was entitled to a one-fifth share. Returns were filed on this basis by Krishnankutty Menon and Kamalam K. Menon (the legal heirs of Shri Kannakutty Menon) on 10-1-1971 and by Achuthankutty Menon (representing Devaki Thampuran) and Ambika R. Menon on 6-10-1971. The original assessments in the case of Achuthankutty Menon, Echukutty Menon and Ambika R. Menon were completed on 8-9-1972. The original assessments in the case of Krishnankutty Menon and Kamalam K. Menon were completed on 29-3-1974. This was on the basis that Achuthankutty Menon, Echukutty Menon and Ambika R. Menon obtained one-fifth share each. The one-fifth share of Kannakutty Menon was assessed in the hands of Krishnankutty Menon and Kamalam K. Menon (one-tenth each). These assessments were based only on the compensation originally awarded.
3. In a report to the chief auditor dated 31-3-1975, the ITO referred to two factors in relation to the escapement of income in the assessments made. The first was that it was subsequently found that Smt. Ammalukutty Amma, who predeceased A.P. Menon, was not a legal heir under the Hindu Succession Act, 1956 and that the compensation amount is, therefore, assessable in the hands of the remaining four legal heirs to one-fourth share each. The second factor mentioned in the report was that a claim for additional compensation for the acquisition of land was pending in the Courts. Although the claim had not yet been decided by the Court, the ITO expressed the view that as per the law and executive instructions in the matter, the amount claimed will have to be brought to assessment. The full text of the report has been reproduced by the AAC in paragraph 4 of his order.
4. On the same day, namely, 31-3-1975, the ITO issued, under Section 148 of the Act, a notice of the reopening of the assessments after recording the following reasons : See my report to the chief auditor of this date of the facts noted therein. The full income chargeable to tax for the assessment year 1971-72 has escaped assessment (additional compensation matter).
Issue notice under Section 148 calling for return of income.
5. This notice was issued only to Achuthankutty Menon, Echukutty Menon and Ambika R. Menon. It has also to be noted that although two factors, namely, the difference in the share (hereinafter referred to as the share factor) and the claim for additional compensation (hereinafter referred to as the additional compensation factor) were mentioned in the report to the chief auditor. In recording the reasons for reopening the assessment, the ITO referred only to the additional compensation factor. The notice was served on the three assessees on 11-4-1975. In pursuance of the same the three assessees filed returns. But no further action was taken in pursuance to the notice issued and the returns filed. The AAC has recorded a finding in his order that the notice under Section 148, referred to above, was one under Section 147(6).
This finding was not questioned before us by the learned departmental representative, who argued the case on the basis that the notice was one under Section 147(b).
6. Another factor to be noted in this connection is that even prior to the issue of the Section 148 notice on 31-3-1975, the ITO had a discussion with the advocate for Echukutty Menon. This was on 24-2-1975. Even on that day the advocate had given a written submission to the ITO where he stated that under the Hindu Succession Act, A.P.Menon had only four legal heirs and that they would be entitled to a one-fourth share each. It was thereafter that the ITO recorded the reason for reopening as the additional compensation factor and issued the Section 148 notice on 31-3-1975.
7. The ITO, subsequently issued another notice under Section 148 to all the five assessees on 21-12-1978. The reasons recorded for issuing this notice has been set out in full in paragraph 5 of the order of the AAC.They refer only to the share factor. It is stated that while the assessees had stated that there were five legal heirs, in fact there were only four legal heirs as Ammalukutty Amma was not a legal heir at all and that the remaining legal heirs were, therefore, entitled to one-fourth share each. For this reason the ITO requested for the sanction of the Commissioner for issuing a notice under Section 148 read with Section 147(a). What is important is that the share factor was the only reason recorded for reopening the assessment and that the reopening was done under Section 147(a).
8. In pursuance to the Section 148 notice issued on 21-12-1978 (hereinafter referred to as the second notice), fresh returns were filed on 9-3-1979 and reassessments were made on 24-3-1979 on all the five assessees. Under the same, the income under capital gains suffered an enhancement in the hands of all the assessees. This was due to the enhancement of the shares of the legal heirs from one-fifth to one-fourth and also the taking into consideration of the award by the Court giving additional compensation for the acquisition of the land.
The total compensation after enhancement came to Rs. 5,12,813 and the net assessable compensation to Rs. 4,54,170 as against Rs. 3,39,473 included in the original assessment.
9. The assessees took up the matter in appeal. The findings recorded by the AAC were to the following effect: The Section 148 notice issued on 31-3-1975 (hereinafter referred to as the first notice) was under Section 147(6) and it related only to the additional compensation factor. As this notice was served on the assessees on. 11-4-1975 and as the asssessment related to the assessment year 1971-72, the period of limitation for completing the assessment as per the notice expired on 11-4-1976 being one year from the date of service of the notice. If the ITO had made a reassessment before the period of limitation ha could have utilised the information on the share factor also because the same had coma to his notice as is clear from the report made by him, to the chief auditor. But no reassessment was made in pursuance to the first notice. When the second notice under Section 148 was issued, the share factor was not a new item of information before the ITO. Since the assessment under the first notice became barred by limitation and as no new material was available before the issue of the second notice, the reassessment proceedings initiated by the second notice arc not valid, It may be noted that there has been issue of two notices only in the case of Achuthankutty Menon, Echukutty Menon and Ambika R. Menon [IT Appeal Nos. 37, 38 and 39]. The AAC, therefore, cancelled the reassessments in the case of these three persons. As stated earlier, with regard to Krishnankutty Menon and Kamalam K. Menon [IT Appeal Nos.
588 and 589], the only notice issued was what has been referred to above as the second notice. With regard to these assessees the AAC held that there is no bar to the reassessment proceedings on account of any earlier assessment proceedings having been initiated. With regard to these assessees, he also held that there has been furnishing of wrong information by them at the time of the original assessment with regard to the share and that the reopening of the assessment in their cases under Section 147(a) on the basis of the information regarding the correct share is, therefore, valid. He, therefore, upheld the reassessments in the case of these two assessees.
10. The ground taken by the department in their appeals is that the AAC erred in holding that the reopening of the assessment under Section 147(a) was bad for the reason that it was based on the same materials which the ITO had when the assessment was reopened on the earlier occasion under Section 147(b).
11. The ground taken by the two assessees in their appeals is that they had disclosed all the material particulars at the time of the original assessment inasmuch as they had mentioned about the death of A.P. Menon and the particulars about the legal heirs, including the fact that Ammalukutty Amma had predeceased A.P. Menon, that it was the duty of the ITO to ascertain the correct share of the assessees under the Hindu Succession Act and to complete the assessment, accordingly.
12. It was contended by the learned departmental representative that it was open to the ITO not to pursue the reassessment proceedings as per the first notice which was under Section 147(b), that it was open to him to initiate fresh proceedings under Section 147(a) on the same materials if he felt that resort to Section 147(a) will be more appropriate in the present case, that action initiated by the ITO can be said to be bad only if it is based on materials available at the time of the original assessment and not because the materials were available at the time of the issue of the first notice, that it has been found even by the AAC that there has been failure on the part of the assessees to disclose fully and truly all the material facts at the time of the original assessment because they had stated that they were entitled only to a one-fifth share while they were actually entitled to a one-fourth share each and that the assessment is within time even if it is treated as one made on the basis of the first notice.
13. On the other hand it was contended by the learned counsel for the assessee that a reopening of the assessment as per the second notice without pursuing the reassessment proceedings as per the first notice is bad in law, that the necessary conditions for reopening the assessment Under Section 147(a) are not present because the assessees had disclosed all the material particulars including the fact that Ammalukutty Amma had predeceased A.P. Menon, that it was for the ITO to have ascertained the correct legal position regarding the shares of the various assessees, that this is a case of the ITO not caring to verify the correctness of the shares mentioned by the assessees, that even assuming that the assessees had made an erroneous or exaggerated claim, it will be no ground for reopening the assessment as it was the duty of the ITO to ascertain the correct claim and that the reassessments are, therefore, bad in law.
14. We have carefully considered the matter. The AAC has recorded a clear finding that the reopening of the assessment as per the first notice was under Section 147(6). This was not disputed before us by the learned departmental representative. It would also appear that the department cannot claim that the first reopening was under Section 147(a) because the second reopening was expressly stated to be under Section 147(o) and a second reopening under the same clause after having not pursued the first reassessment proceedings will be bad in law. For this reason also the department cannot but claim that the first reopening is under Section 147(b). If so, the further contention of the learned departmental representative that the reassessment made will be within the period of limitation for the first reopening cannot be accepted. The assessment year was 1971-72 and the first notice under Section 148 was served on 11-4-1975. Under Section 153 of the Act, the period for completing a reassessment under Section 147(6) is four years from the end of the assessment year in which the income was first assessable or the expiry of one year from the date of service of notice under Section 148, whichever is later. It follows that the period available for completing the reassessment expired on 11-4-1976 and the reassessment made on 24-3-1979 cannot, therefore, be supported on the basis of the first notice issued by the ITO.15. We may now consider the question whether the reopening under Section 147(a) as per the second notice was a valid one. For this purpose we will assume, without deciding, that it is open to the ITO to abandon a reassessment proceeding initiated under Section 147(6) and to initiate a fresh reassessment proceeding under Section 147(a), if he is of the view that the materials available with him render it appropriate that he proceeds under Section 147(a) and not under Section 147(6). The reason recorded for the second reopening of the assessment, as stated earlier, is only the share factor. It is stated that the assessees wrongly claimed to be entitled to a one-fifth share each while they were actually entitled to a one-fourth share each. As already stated along with the earliest return filed by Echukutty Menon on 25-9-1971, he gave a fetter stating that the succession to the estate of A.P.Menon is governed by the Hindu Succession Act, that he had two brothers and three sisters and that one of the sisters, namely, Ammalukutty Amma had predeceased him. The letter has been reproduced in paragraph 4 of the order of the AAC. It is clear that all the necessary particulars for ascertaining the correct share of the assessees had been placed before the ITO. It was for him to have verified the correctness of the claim made by the assessees with regard to the quantum of the shares by referring to the relevant provisions of the Hindu Succession Act. It was explained by the learned counsel for the assessees that they came to know only subsequently that the children of Ammalukutty Amma will not be entitled to a share because of the fact that Ammalukutty Amma predeceased A.P. Menon. Only the brothers and sisters who were alive would fall under Class II of the Schedule to the Hindu Succession Act and they will, therefore, take a one-fourth share each. The children of a predeceased sister would fall only under the subsequent class. Even assuming that the assessees were aware of the correct legal position, it would be a case of the assessees making an excessive or exaggerated claim, the correctness of which the ITO should have verified. We are, therefore, of the view that the assessees had placed before the ITO all material particulars even at the time of the original assessment and that the assessment cannot be reopened on the ground that the assessees had not disclosed fully and truly all the material facts necessary for making the assessment. The reopening of the assessment under Section 147(a) cannot, therefore, be sustained.
16. It was then contended by the learned departmental representative that the reopening can be sustained on the ground that at the time of the original assessment the assessees had not disclosed fully and truly all the material facts with regard to the additional compensation factor. It is true that at that, time the assessees had not mentioned anything about the fact that they had asked for a reference to the Court for the purpose of prosecuting a claim for an enhancement of compensation. It was pointed out by the learned representative for the assessee, relying upon the ruling in Modi Spg. & Wvg. Mills v. ITO  101 ITR 637 (All.), that an assessee is bound to furnish only such information as is required to be furnished in the various columns to the return and that none of the columns in the return required the assessee to mention that he had asked for a reference to the Court for claiming enhanced compensation. Even assuming that there has been a failure to disclose material facts, it does not seem to be open to the department in the present case to rely upon the same to reopen the assessment. At the time of the first reopening, the ITO was aware of both the share factor as well as the additional compensation factor.
Still he reopened the assessment only with regard to the additional compensation factor and thereafter did not pursue the same. At the time of the second reopening this was specifically done on the basis of the share factor. Thereafter, it does not seem to be open to the department now to claim that the second reopening should be treated as one based on the compensation factor and also as one falling under Section 141(a). As already stated the assessment can be sustained only if the matter is treated as one falling under Section 147(a). It will also have to be assumed that the department can rely on an information which was in the records but which was not specifically recorded as a reason for reopening the assessment. Even assuming that all this is possible, in the present case there is an obstacle in the department succeeding in its contention. If the failure to disclose about the claim for additional compensation is treated as a matter falling under Section 147(a), the department had reopened the assessment on this basis under he first notice and a return had been filed in pursuance to the same.
It is not open to the department to reopen the matter again on the same material without completing the earlier assessment and disposing of the returns already filed. The rulings of the Supreme Court in CIT v.Ranchhoddas Karsondas  36 ITR 569 and Estate of the late A.M.K.M.Karuppan Chettiar v. CIT  72 ITR 403 clearly support the position stated above. These rulings were sought to be distinguished by the learned departmental representative on the ground that in those cases the original assessments had not been completed. In our opinion the ratio of the decisions will clearly apply even when the matter has been reopened and a return had been filed. In this view of the matter also the reassessment on the basis of the additional compensation factor cannot be sustained.
17. What we have stated above will be fully applicable only with regard to appeal Nos. 37, 38 and 39 wherein only two notices were issued. In the case of IT Appeal Nos. 588 and 589 only one notice, which has been dealt with earlier in this order as the second notice has been issued.
But with regard to the same we have already held that the reopening under this notice is only with regard to the share factor and that with regard to the same, it cannot be said that the assessees had failed to disclose fully and truly all material factors at the time of the original assessment. The reassessments in these cases also cannot, therefore, be sustained.
18. In the result, appeal Nos. 588 and 589 (Coch.) of 1981 by the assessees are allowed and appeal Nos. 37, 38 and 39 (Coch.) of 1981 by the department are dismissed.