1985 PLP 725 (PTD)

RAMANUJAM, J.‑‑The assesses in this case was deriving income from property, share income from firms and income under other sources for the assessment year 1962‑63, the relevant accounting year being the year ending with 13‑4‑1962 The assessee is owning a building known as Lucky Bungalow' at St. Thomas Mount, Madras. The State Government took acquisition proceedings for acquiring the said bungalow and issued a notification under section 4 of the Land Acquisition Act on 24‑5‑1961. Section 6 declaration was issued on 6‑9‑1961. The Collector gave the award on 14‑3‑1962, fixing the compensation payable to the petitioner in respect of the building acquired. The possession of the building was actually taken over on 3‑4‑1962. There appears to be some dispute regarding the quantum of compensation and the Court on 21‑4‑1966 finally settled the same.

2. For the assessment year 1967‑68, the capital gains arising out of the compensation received from the Government were brought into account. The Income‑tax Officer computed the capital gains at Rs. 1,08,098 by his assessment order dated 30‑5‑1969. The Appellate Assistant Commissioner on the appeal preferred by the assessee confirmed the assessment. On further appeal to the Income‑tax Appellate Tribunal, the Tribunal held that as the "transfer" took place in the previous year relevant to the 1962‑63; the capital gains cannot be assessed in the assessment year 1967‑68.

3. Taking note of the decision of the Tribunal that the capital gains arising out of the acquisition of the assessee's property by the Government can be assessed only in the years in which the acquisition took place, the I. T. O. obtained the approval of the Central Board of Direct Taxes and initiated reassessment proceedings under section 147 of the Income- tax Act, 1961. To a notice under section 148, the assessee filed a return under protest on 30‑11‑1974 showing the aforesaid sum of Rs. 1,08,098 as capital gains.' The assessee also filed a letter alongwith the return objecting to the reassessment on the ground that reassessment could be trade only under 1985 section 147(a) in which case the reassessment will be beyond time. The I. T. O. rejected the assessee's contention that the reassessment should be only under section 147 (b) and completed the assessment holding that the reassessment is only under section 147 (a). The assessee went up in appeal before the Appellate Assistant Commissioner reiterating the objections raised by him in his letter dated 29‑11‑1974 before the I. T. O. The Appellate Assistant Commissioner, however, rejected the assessee's contention. The assessee filed a further appeal to the Income‑tax Appellate Tribunal. The Tribunal after referring to the relevant facts and circumstances held that the reassess ment could be taken to have been made only under, section 147 (a) read with section 149 (a) (ii), and therefore, the reassessment proceedings in respect of the assessment year 1962‑63 made in this case were well within time. Aggrieved against the order of the Tribunal the assessee sought and obtained a reference to this Court on the following question of law :‑ "Whether on the facts and in the circumstances of the case the reassess ment made on 17‑1‑1975 for the assessment year 1962‑63 is within the prescribed time?

4. In this case, the reassessment has been made on 17‑1‑1975 for the assessment year 1962‑

63. If the assessment is taken to be under section 147(a) read with section 14 (a)(h), as held by the Tribunal, the period before which reassessment has to be initiated is 16 years and completed within 4 years from the end of the year in which it was reopened. Thus, the only question that arises for our consideration in this case is, whether the reassessment in this case has been made under section 147(a) as alleged by the revenue or under section 147(6) as alleged by the assessee.

5. As already stated, there is no dispute in this case that the capital gains arising out of the acquisition of the assessee's property can be brought to tax only in the year of transfer, i. e. to the assessment year 1962‑

63. In this case, it is not also in dispute that in the return filed for the assessment year 1962‑63, the assessee did not indicate either the factum of acquisition or the amount, which has been awarded as compensation by the Collector in respect of the building, acquired. For the first time in the assessment year, 1967‑68 he submitted a return showing the receipt of the compensa tion from the Government in relation to the acquisition of his property. Though he submitted a return showing the. capital gains, he contended before the assessing authority that the capital gains should be taken to have accrued only in the year when the building was acquired, i. e. in the year 1962‑63 and not in the assessment year 1967‑

68. Though he failed in his attempt to exclude the capital gains in the assessment year 1967‑68 on that ground before the lower authorities, he ultimately succeeded before the Tribunal and the capital gains relating to the property acquired were excluded from assessment in that assessment year. Taking note of the Tribunal's view that the capital gains could be taxed only in the assessment year 1962‑63, proceedings for reassessment were initiated and these proceedings have been questioned on the ground that they are time‑barred. The Tribunal in this case has given the following findings for its conclusion that the provision applicable to the facts of this case is section 147(a) and not sec tion 147(b) : (I) That there is no indication in the return or any statement accom panying the return for the assessment year 1962‑63 regarding the acquisition proceedings in respect of the property "Lucky Bungalow". (2) Even though the original assessment was made on 19‑2‑1963 and further reassessment was made on 26‑6‑1963, the assessee at no stage gave any indication about the acquisition of the property or the passing of an award granting compensation in relation to that property by the acquiring authority. (3) It was after the Income‑tax Appellate Tribunal by its order held that the transfer took place during the accounting year relevant to the assessment year 1962‑63, the. Department came to know that the capital gains arising out of the sale of the above property bad escaped assessment, and as the amount of capital gains which escaped the assessment amounted to more than a lakh of rupees, the proceedings attracted section 149 (a)(ii).

6. On the facts found by the Tribunal that in the assessment year 1962‑63, the assessee did not put the I. T. O. on notice of the acquisition proceedings or the amount awarded as compensation, as a result of which there has been escapement of income in that assessment year, no other conclusion is possible except to say that the provision that is applicable in this case is section 147(a). The learned counsel for the assessee would say that though there may be a non‑disclosure of a transaction in the year 1962‑63 that cannot be construed as non‑disclosure of income which alone will attract the provision of section 147(a). According to, the learned counsel for the assessee, the assessee himself was not aware of the actual amount‑of compensa tion awarded, and therefore, it was not possible for him to include the capital gains in the return filed for the year 1962‑63, nor was it possible to disclose the actual capital gains before the assessing authority as the quantum of compensation was in dispute. However, we find that this submission does not gain support from the facts of this case. We see that the award was passed by the Collector on 14‑3‑1962 and the possession of the building was taken only thereafter on 3‑4‑1962. It is thus clear that before the close of the account year, the Collector had fixed the compensation amount in his award on 14‑3‑1962 and had also taken possession of the property. Thus it is clear that the assessee was aware of the compensation awarded to him by the collector in respect of the building acquired. Even assuming that the. Land Acquisition Court enhanced the compensation that will not justify the assessee's conduct in not disclosing the compensation awarded by the Collector at the first instance in the year 1962‑63.

7. The assessee is not also right in stating that since there is only non‑disclosure of a transaction, Section 147 (a) will not stand attracted. Sec tion 147 (a) is as follows :‑ "

147. Income escaping assessment.‑If (a) the I. T.‑O. ‑ 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 I. T. O. 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 ...... The said provision contemplates two situations. (1) The non‑disclosure on the part of the assessee fully and truly all material facts necessary for his assessment for that year and (2) as a result of the said non‑disclosure income chargeable to tax has escaped for that assessment year. In this case, either the transaction related to the acquisition of the building or the compensation awarded for that building by the Government has not been disclosed. There fore, it can be said that the assessee failed to disclose fully and truly all-material facts necessary, for his assessment for that year. Admittedly in this case the capital gains chargeable for assessment escaped assessment in view of such non‑disclosure of all material facts necessary for the assessment. The assessee's learned counsel is not correct when he says that only section 147 (b) could be invoked when there is a non‑disclosure of a transaction. This contention completely overlooks the language adopted in section 147(a). It contemplates non‑disclosure of material facts which has led to the income chargeable to tax being escaped from assessment for that year. It is not possible to construe the expression "material fact" as 'income'. Whether the non‑disclosure is of a single transaction or of a multiple transaction, the question is, whether those are necessary materials, for assessment. We are of the view that the non‑disclosure of the factum of acquisition and the amount awarded ash compensation in the return submitted before the assessing authority will amount to non‑disclosure of the material facts necessary for making the assessment for the year 1962‑

63. In this case, we have to say that there was not only non‑disclosure of the income chargeable to tax in the assessment year, but also non‑disclosure of all material. facts necessary for completing the assessment for that year. We entirely agree with the view taken by the Tribunal 'in this case that the proper provision applicable is section 147 (a) read with section 149 (a) (1i). Since re‑assessment has been initiated within 16 years contemplated by section 149 (a) (ii), re‑assessment was held in time. In this view of the matter, we have to answer the question in the affirmative and against the assessee. The revenue will have the costs from the assessee. Counsel's fee at Rs.

500. M. B. A. Question answered in affirmative.