CIT Vs. MARTHANDOM COMMERCIAL BANK LTD

JUDGEMENT

(1.) In relation to the assessment for the year 1966-67 of the Marthandom Commercial Bank Ltd., the following question has been referred to this Court by the Income Tax Appellate Tribunal, Cochin Bench:

(2.) In the assessment order dated 6th September 1966, Annexure B, the income of the assessee was fixed at Rs. 56,565. This income included income from Government securities The relevant accounting period for the assessment year 1966-67 was the calendar year 1965. During that year, the assessee had collected Rs. 74,991.04 as interest on Government securities. Deducting therefrom interest on tax free securities and deducting a further sum of Rs. 27,958.20, the statement appended to the return indicated a sum of Rs. 50,201.84. In making the assessment this income in the statement appended to the return was accepted by the Income Tax Officer. The sum of Rs. 27,958.20 sought to be deducted from interest actually collected during 1965 was stated to be interest that had accrued in the accounting year 1964. It came to light that during the accounting year 1964, which was the accounting period for the assessment year 1965-66, the assessee had disclosed only a sum of Rs. 10,899 as income that had accrued during the accounting period, the year 1964. The Income Tax Officer after recording his reasons for thinking that income had escaped assessment by reason of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment year 1966-67 issued a notice to the assessee under S.148 and after considering the return filed by the assessee and after hearing the assessee passed an assessment order which is Annexure C on 30th November 1971 adding Rs. 18,452 to the assessment for the year 1966-67 the above sum being the difference between Rs. 29,351 and Rs. 10,899. The assessee appealed from the assessment order but the Appellate Assistant Commissioner dismissed the appeal. He however met with success in appeal before the Appellate Tribunal. The Appellate Tribunal stated towards the end of Para.3 of its order "In order to arrive the correct amount to be taxed, the assessee should have claimed a deduction of only Rs. 10,899 instead of Rs. 27,958. However, the Income Tax Officer accepted this return with some modifications and completed the assessment on 6th September 1966". And in stating so, it proceeded to state at the end of Para.7:

(3.) It was argued before the Income Tax Appellate Tribunal that if for any reason reopening of the assessment was held to be unjustified under S.147(a) the reopening must be upheld as leaving been initiated under S.147(b). This argument was negatived by the Tribunal by relying on the decision of the Supreme Court in Johri Lal (H. U. P ) v. Commissioner of Income Tax, U. P. 1973 (88) ITR 439 An application was moved by the department before the Tribunal which is at page 19 of the paper book by which the department was required to state a case and refer two questions reading as follows to this court as arising from the order of the Tribunal.