Income-tax---

----Reassessment---Failure to disclose material facts---Assessment completed accepting income returned from house property---Subsequently Inspector finding that house constructed by assessee and his wives jointly,--Difference between investment cost in construction of house shown by assessee and report of Inspector more than Rs.1 lakh---Material information relating to construction of house by assessee along with his wives and also rent received duly disclosed---Report of Inspector and valuation report by the Departmental value obtained after completion of assessment---Report made basis for reopening assessment---No failure to disclose income fully and truly---Reassessment not valid---Indian Income Tax Act, 1961, Ss. 147(a) & 148.

The assessment of the assessee for the assessment year 1974-75 was completed under section 143(3) of the Income Tax Act, 1961, accepting the returned income from house property at Rs.6,785, Subsequently, the Inspector of Income-tax was deputed to evaluate the investment made. by the assessee in the construction of a house property, who found that the house had been constructed by the assesssee and his wives jointly, that the cost of investment during the year was Rs.8,08,000 as against Rs.5,08,776 shown by the three co-owners. Thereafter the Income-tax Officer issued notice under section 148 of the Act for reopening the assessment under section 147(a) and in the reassessment under section 143(3), the total income was assessed at Rs.22,77,200. On appeal to the Commissioner (Appeals), the assessee contended that all material information relevant to the construction of the house property was furnished. before the Assessing Officer and that the construction of the house was not completed during the previous year relevant to the assessment year 1974-75 and it was completed only in the assessment year 1975-76. The Commissioner of Income-tax (Appeals) found that in the reassessment the Income-tax Officer had wrongly relied on the valuation report of the Departmental value, which had been obtained after completion of the assessment aid that could not be made the as is for the reopening of the assessment and therefore, he held that the reopening of the assessment was bad in law. On further appeal, the Tribunal upheld the order of the Commissioner (Appeals). On a reference:

Held, affirming the order of the Tribunal, that the assessment has been completed on the basis of material placed by the assessee in respect of the construction of the house and the assessee also disclosed the rent received from the house so constructed. The material fact that the assessee along with his two wives had constructed the house had also been disclosed. Thus, it could not be said that any material fact. had been concealed by the assessee or the assessee had not disclosed fully and truly all material facts. The report of the Inspector was subsequently obtained and the valuation report of the Departmental value was also subsequently obtained. Therefore, it could not be said that the assessee had not disclosed his income fully and truly. The reassessment under section 147(a) was not valid.

Tarawati Debi Agarwal (Simt) v. I.T.O. (1986) 162 ITR. 606 (Cal.) fol.

Standing Counsel for the Commissioner.

Nemo for the Assessee.

JUDGMENT

As per our directions on an application under section 256(2) of the Income Tax Act, 1961, the following question has been referred to this Court

for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the reopening of the assessment proceedings under section 147(a) of the Income Tax Act. 1961, was legally invalid?"

The assessee filed return of income in July 1974, showing Income from house property at Rs.6,785. The assessment was completed under section 143(3) on March 29, 1977, accepting the returned income Subsequently, the Inspector of Income-tax was deputed to evaluate the investment made by the assessee in the construction of a house property a P-1, Hyde Lane, Calcutta, who reported in the matter stating that the house has been constructed by the assessee and his wives jointly, viz., Smt. Fatemabai Hassenali and Smt. Fizza Abbasbhai, A lift has also been installing that house. As per the report of the Inspector the investment cost during the year is Rs.8,08,000 as against Rs.5,08,776 shown by the three co-owners. The difference comes to more than Rs.1lakh.

Thereafter, a notice under 148 of the Act was sent to the assessee for reopening of the assessment under section 147(a) of the Act. In the reassessment under section 143(3) read with section 147(a) the total income assessed was Rs.22,77,200. Thereafter, the assessee has challenged the reassessment order before the Commissioner of Income-tax (Appeals). Before the Commissioner of Income-tax (Appeals) it was submitted that all material information. relevant to the construction of the house property was furnished before the Assessing Officer and the rent received by the assessee was also duly disclosed. It was also brought to the notice of the Commissioner of Income-tax (Appeals) that the construction of the house was not completed during the previous year relevant to the assessment year 1974-75 and it was completed only in the assessment year 1975-76.

The Commissioner of Income-tax (Appeals) further found that in the reassessment, the income-tax Officer has wrongly relied on the valuation report of the departmental valuer, which has been obtained after completion. of the assessment and that cannot be made the basis for the reopening of the assessment and finally he held that the reopening of the assessment was bad in law.

In appeal before the Tribunal, the Tribunal placed reliance on a decision in the case of Smt. Tarawati Debi Agarwal v. ITO (1986) 162 ITR 606 of the Calcutta High Court and upheld the view taken by the Commissioner of Income-tax (Appeals).

Heard learned counsel for the Revenue. None appears for the assessee. The admitted facts are that the assessment has been completed on the basis of material placed by the assessee in respect of the construction of the house and also duly disclosed the rent received to the house so constructed. The material fact that the assessee along with his two wives has constructed the house, was disclosed. Details of the investment in the house have also been disclosed. Thus, it cannot be said that any material facts has been concealed by the assessee, or the assessee has not disclosed fully and truly the material facts of his income. The so-called information is a report of the. Inspector who had subsequently been deputed by the Assessing Officer to find out the investment in the construction of the house and also obtained a report of the departmental valuer. The Assessing Officer has made this report the basis for reopening of the assessment under section 147(a). The condition precedent is that the Assessing Officer has to justify that the assessee has not disclosed the material facts in respect of his income in the relevant previous year. The report of the Inspector has subsequently been obtained in respect of the investment in the construction of the house and also the valuation of the departmental valuer which is also subsequently obtained. Therefore, it cannot be said that the assessee has not disclosed his income fully and truly. Even otherwise, the issue is squarely covered by the decision in the case of Smt. Tarawati Debi Agarwal (1986) 162 ITR 606 (Cal).

In the result, we answer the question referred in favour of the assessee and against the revenue.

The application is thus disposed of.

M.B.A./3285/FCReference answered.