1. The Income-tax Appellate Tribunal, Jaipur Bench, has referred the following question of law for our opinion :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the reopening of the assessment under Section 147(a) of the Income-tax Act, 1961, was not valid ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the previous year in respect of the income from undisclosed sources would be financial year and not the accounting year of the assessee ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in deleting the addition of Rs. 26,000 from the total income of the assessee for the assessment year 1956-57 and Rs. 15,600 from the total income of the assessee for the assessment year 1957-58 ?
4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalties levied under Section 271(1)(c) of the Income-tax Act, 1961, for the assessment years 1956-57 and 1957-58?'
2. The ITO, vide his order dated July 6, 1957, and October 17, 1957, had passed orders of original assessment with respect to the assessment years 1956-57 and 1957-58, respectively. Thereafter, the ITO has reopened the assessment of the above-mentioned assessment years within a period of eight years under Section 147(a) of the I.T. Act, 1961 (hereinafter referred to as 'the Act)'. The notice under Section 147(a) read with Section 148 was served on the assessee after obtaining approval of the CIT. The ITO had recorded the following grounds for reopening the assessment:
'On the introduction of income-tax in this part of the country from the assessment year 1950-51, the assessee showed inflated cash balance of over Rs. 75,000, which was not proved by production earlier of account bookstand the ingenuine nature of the cash balance was also apparent from the fact that in spite of so much available cash, the assessee was obtaining small loans from outside parties on interest. In the assessment order for 1950-51, the ITO, therefore, gave the finding that the cash balance, which was in the form of miscellaneous cash and Tijori account, was not genuine and as and when in future the assessee made investments and explained them as out of the relevant cash or Tijori account, those investments should not be considered as properly explained but deemed as income from undisclosed sources. In the assessment year under consideration, the assessee had credited an amount of Rs. 26,000 in his capital account. This credit wasnoted in the account books as out of the withdrawals from Tijori account. In the assessment originally completed on August 5, 1957, the ITO overlooked to consider this credit item in the context of the finding given in the assessment order for 1950-51. It is accordingly proposed to reopen this assessment to consider the above-noted investment of Rs. 26,000 which does not stand properly explained and is prima facie income from undisclosed sources. The tax effect will be about Rs. 47,000.'
3. The Commissioner granted approval by making an endorsement 'Yes' for reopening the assessment.
4. The Tribunal after considering the above reasons recorded by the ITO for reopening the assessment observed that :
'Mere look at the aforesaid reasons shows that so far as the Income-tax Officer is concerned, he finds no fault with the assessee at all. The entire fault according to him lies with the Income-tax Officer who made the original assessment inasmuch as he ignored to take note of the observations of the Income-tax Officer who had made the assessment for the year 1950-51. The Tribunal further observed that the above failure could by no stretch of imagination be considered to be that of the assessee. The failure was clearly of the Income-tax Officer. The Tribunal thus held that they were unable to understand as to how on the basis of such reasons recorded by the Income-tax Officer any man of ordinary prudence could have reasons to believe that the income of the assessee had escaped assessment due to the omission or failure of the assessee to disclose wholly or truly all the material facts. Nowhere in his proposals the Income-tax Officer has mentioned as to what was the primary material which was not disclosed by the assessee at the time of the original assessment and for which default the assessments of the assessee for the assessment years 1956-57 and 1957-58 were being reopened.'
5. In view of these circumstances, the Tribunal held that the reopening of the assessment under Section 147(a) of the Act in both these cases was incompetent.
6. We have heard Mr. Surolia on behalf of the Department and Mr. Ranka on behalf of the assessee. We have perused the reasons recorded by the ITO for reopening the assessment. In our view, the ITO failed to give any reason that there was any failure or omission of the assessee to disclose fully and truly all the material facts at the time of making the original assessment. In the absence of such finding recorded by the ITO, he had no jurisdiction to reopen the assessment under s, 147(a) of the Act. It is well settled that even if there was any oversight or mistake or inadvertence in making the original assessment, it does not empower any ITO to reopen the assessment under Section 147(a) of the Act. A catena ofdecisions have been cited by Mr. Ranka in support of the view taken above. They are :
(1) Chhugamal Rajpal v. S. P. Chaliha : 79ITR603(SC) (2) CIT v. Burlop Dealers Ltd. : 79ITR609(SC) (3) Sheo Nath Singh v. AAC of IT : 82ITR147(SC) (4) Gemini Leather Stores v. ITO : 100ITR1(SC) (5) Parashuram Pottery Works Co. Ltd. v. ITO : 106ITR1(SC) (6) Indian and Eastern Newspaper Society v. CIT : 119ITR996(SC) and (7) General Mrigendra Shum Sher Jung Bahadur Rana v. ITO : 123ITR329(Delhi) .
7. We are clearly of the view that no mistake has been committed by the Tribunal in passing its order dated April 19, 1974, wherein it has been held that, in the facts and circumstances of this case, the reopening of the assessment under Section 147(a) was incompetent.
8. In view of these circumstances, question No. 1 referred to above is answered in the affirmative. In view of our answer to question No. 1 in the affirmative, all the rest of questions Nos. 2 to 4 have become unnecessary and redundant and need not be answered. In the facts and circumstances of the case, the parties shall bear their own costs.