K.S. Hegde J.
1. In this appeal by special leave the department-appellant prays that this Court may be pleased to direct the Income-tax Appellate Tribunal, Bombay Bench 'B', to state a case and submit the three questions of law set out in the special leave application. But, at the time of hearing, Mr. S. T. Desai, learned Counsel for the department, informed us that he is pressing the appeal only in respect of one question of law and that question is :
Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was competent to rectify its order dated 29th April, 1966, in respect of the assessment year 1960-61, in regard to the sum of Rs. 1,65,718, being the amount paid by the assessee as consultation fees ?
2. We may mention at this stage that this is the only question the department asked the Tribunal to submit to the High Court and that is also the question that it wanted the High Court to call upon the Tribunal to submit to it after stating a case.
3. The Tribunal refused to state a case on the ground that its findings are findings of fact and from its order no question of law arose for decision. When the department moved the High Court praying that it may be pleased to direct the Tribunal to state a case and submit to the High Court the question mentioned above, the High Court summarily rejected that application. Thereafter, this appeal has been brought by special leave.
4. Now let us turn to the facts of the case. In the assessment year 1960-61, the assessee claimed deduction of two allowances, namely, a sum of Rs. 6,000 paid as pension to the widow of an ex-employee and another sum of Rs. 1,65,718 paid to a Swiss firm of consultants as consultation fees from its gross income. The Income-tax Officer allowed both those allowances and assessed the assessee after giving deductions to those amounts from out of the total income of the assessee.
5. In the assessment year 1961-62, the assessee again claimed two allowances, namely, a sum of Rs. 6,000, paid as pension to the widow of the ex-employee and a sum of Rs. 33,076 paid as consultation fees to the Swiss firm mentioned earlier. On this occasion the Income-tax Officer disallowed both the claims. He came to the conclusion that there was no evidence to show that the sum of Rs. 6,000 paid as pension was expended or laid out exclusively for the purpose of the business. So far as the second item is concerned, he came to the conclusion that it was a capital expenditure.
6. Thereafter, the Income-tax Officer issued a notice to the assessee under Section 147(b) of the Income-tax Act, 1961, proposing to reopen the previous year's assessment. After overruling the objections of the assessee the Income-tax Officer reopened the assessment and reassessed the assessee after disallowing the claim of Rs. 6,000 as well as of Rs. 1,65,718 which he had allowed earlier.
7. The assessee appealed against that order to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. Thereafter, the assessee took up the matter in second appeal to the Tribunal.
8. Before the Tribunal, two contentions were advanced, namely, (1) the Income-tax Officer received no fresh information after assessment was made on the basis of which he could have had reason to believe that any income chargeable to tax had escaped assessment and, therefore, he had no jurisdiction to issue a notice under Section 147(b), and (2) that, on the facts of the case, the allowances claimed by the assessee were permissible allowances.
9. The Tribunal first went into the question as to the validity of the notice issued. The Tribunal examined the contention relating to the validity of the impugned notice under two heads. It first examined the question whether the Income-tax Officer had received any fresh information after the assessment on the basis of which he could have had reason to believe that the deduction of Rs. 6,000 paid as pension was an impermissible allowance under law and, therefore, that sum had escaped assessment. Secondly, whether he had received any further information after the assessment on the basis of which he could have had reason to believe that the deduction of Rs. 1,65,718 paid to the Swiss firm as consultation fees was not an allowable deduction. On the first question the Tribunal came to the conclusion that the Income-tax Officer had information in his possession from which he could have had reason to believe that the sum of Rs. 6,000 had escaped assessment. It noted that the assessee did not place any material before the Income-tax Officer at the time of the assessment to show that the said sum of Rs. 6,000 was expended or laid out exclusively for the purpose of business and he received additional information on that point during the succeeding year's assessment from which he could have had reason to believe that the said sum escaped assessment. Hence, the Tribunal came to the conclusion that the notice under Section 147(b), in that regard, is a valid notice.
10. Now, coming to the deduction of Rs. 1,65,718 paid to the Swiss firm as consultation fees, the Tribunal came to the conclusion that all the necessary facts had been placed before the Income-tax Officer at the time of the assessment and, therefore, he could have had no fresh information entitling him to issue a notice under Section 147(b). But after coming to that conclusion the Tribunal observed :
However, in view of our finding that there was escapement of income in regard to the pension paid to the widow of the ex-employee, for which the Income-tax Officer could legitimately take action under Section 147(b) of the Act for this year, as also for the two earlier years, the assessee succeeding on this point (that the Income-tax Officer had no information on the basis of which he could have reopened the assessment in respect of the allowance of Rs. 1,65,718) does not really help it. The assessments reopened under Section 147(b) of the Act for the years 1958-59, 1959-60 and 1960-61 were thus, in our opinion, validly reopened. The contention of the assessee to the contrary is, therefore, rejected.
11. After coming to those conclusions, the Tribunal went into the merits of the case to find out whether the allowances claimed were permissible deductions under law. It held that the pension paid was a permissible allowance but it took the view that the payment made to the Swiss firm was a capital expenditure and hence the same cannot be given deduction in computing the assessee's taxable income. The Tribunal also considered some other contentions advanced before it with which we are not concerned now.
12. It is true that in the course of its order the Tribunal had remarked more than once that the Income-tax Officer had no jurisdiction to reopen the assessment in regard to the deduction of the amount paid to the Swiss firm but those observations were made while considering whether a notice under Section 147(b) could have been given in respect of that allowance. It appears from the order of the Tribunal that its final conclusion was that, though a notice under Section 147(b) would have been invalid if the only question was whether the sum paid to the Swiss firm was a permissible allowance but the said notice has to be considered as valid in its entirety, as it was valid in respect of the deduction of the payment of pension. It appears to us that the view taken by the Tribunal at that stage was that if notice under Section 147(b) is valid in one respect, the same is sufficient to reopen the entire assessment, call for a fresh return and reassess the assessee, ignoring the earlier assessment. We express no opinion as to whether this view is correct or not. All that we need say is that from the order of the Tribunal, it appears, that that was the view taken by it.
13. After that order was made, the assessee moved the Tribunal to state a case and submit certain questions of law to the High Court of Bombay. We are told that that application is still pending. During the pendency of that application, the assessee moved the Tribunal to rectify its order. The plea taken by the assessee in its application to the Tribunal for rectification of the order was that the Tribunal having positively come to the conclusion that there was no ground for the Income-tax Officer to reopen the assessment in respect of the consultation fees paid to the Swiss firm by inadvertence, it has disallowed the claim of the assessee in that regard and that was an obvious mistake ; on the basis of that plea the Tribunal was requested to correct the alleged mistake. The Tribunal acceded to that prayer of the assessee and ordered that the assessment of the assessee for the assessment year 1960-61 cannot be reopened in respect of the deduction given for the payment of consultation fees to the Swiss firm. Thereafter, the department moved the Tribunal to state the case and . submit the question set out earlier for obtaining the opinion of the High Court of Bombay, on that question.
14. In our opinion the question of law sought to be raised by the department does arise from the order of the Tribunal and the Tribunal was wrong in not stating the case and submitting that question to the High Court. We are also of the opinion that the High Court erred in summarily dismissing the application of the department.
15. For the reasons mentioned above, we allow this appeal and direct the Tribunal to state a case and submit the question set out earlier to the High Court. No costs.