AMBALAL JIVABHAI PATEL Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) A short question arises on this petition, namely, whether a certain intimation received by the ITO from the Assessor and Collector of Municipal Taxes, Municipal Corporation of Ahmedabad, could be said to constitute "information" on which the ITO could act for the purpose of initiating proceedings for reassessment against the petitioner under S. 147(b) of the IT Act, 1961. The petitioner is an assessee owning an immovable property situate at Nawrangpura, Ahmedabad. In his assessment for the asst. year 1958 59 for which the corresponding previous year was the calendar year 1957, the petitioner returned a total income of Rs. 78,542, which included Rs. 3,553 under the head "Income from property". The amount of Rs. 3,553 was shown in the return as income from property on the basis of the reteable value fixed by the Municipal Corporation under the provisions of the Bombay Provincial Municipal Corporation Act, 1949. The ITO accepted the amount of Rs. 3,553 as representing the annual value of the said immovable property and by an order if assessment dated 31st July, 1959, assessed the total income of the petitioner at Rs. 79,612, on the basis of income under the head "Income from property" being Rs. 3,553. The petitioner was thereafter assessed from year to year up to the asst. year 1962 63 and throughout these assessments the income from property was shown by the petitioner at Rs. 3,553 and was accepted as such by the ITO. On 27th March, 1963, however, the ITO issued a notice to the petitioner under s. 148 of the Act stating that whereas he had reason to believe that the income of the petitioner chargeable to tax for the asst. year 1958 59 had escaped assessment within the meaning of S. 147 he proposed to reassesss the income for the said assessment year and requiring the petitioner to file a return of his income for the said assessment year within thirty days from the date of the receipt of the notice. Since it was not stated in the notice as to what income was alleged by the ITO to have escaped assessment and what were the grounds on which the ITO had reason to believe that such escapement had taken place nor was the notice preceded by any inquiry or correspondence affording indication to the petitioner as to what were the grounds on which the ITO alleged that the income of the petitioner had escaped assessment, the petitioner addressed a letter dated 26th April, 1963, to the ITO pointing out the aforesaid facts and contending that inasmuch as the ITO had no materials on the basis of which he could have reason to believe that any income of the petitioner had escaped assessment the notice was illegal and void. The ITO replied to the petitioner by his letter dated 27th April, 1963, in which he took up the stand that it was not obligatory on him to disclose the reasons for reopening the assessment and that he was entitled to issue the notice since he had sufficient materials and reasons to reopen the assessment in the interest of proper assessment of correct income according to law. The petitioner thereupon filed the present petition challenging the validity of the notice issued by the ITO.

(2.) THE ITO against whom the petition was directed filed an affidavit in opposition to the petition and in the affidavit he reiterated his stand that he was not bound to intimate to the petitioner as to what part of the income of the petitioner had escaped assessment and what were the grounds which led him to believe that such income had escaped assessment. He however, proceeded to state that information in consequence of which, according to him, he has reason to believe that the income of the petitioner had escaped assessment. He pointed out that the annual value of the said immovable property was returned by the petitioner on the basis of the reteable value fixed by the Municipal Corporation and the previous ITO accepted the same believing that it represented the correct annual value of the said immovable property. In or about 1962, however, on making detailed inquiries, he came to know from the Assessor and Collector of Municipal Taxes, Ahmedabad Municipal Corporation, that though according to the principles of rating, assessment of a property should be made by the Municipal Corporation on the basis of rent that a hypothetical tenant would pay if the property is let out from year to year, the Municipal Corporation did not strictly adhere to that principle in practice and in respect of properties occupied by owners, the Municipal Corporation had made concessional assessment as compared to that principle to rented properties. He also learnt from the Assessor and Collector of Municipal Taxes that in fixing the reteable value of properties occupied by owners, the Municipal Corporation did not observe any fixed ratio of concession in reference to the fair rental value. He pointed out that in consequence of this information which came in his possession from the Assessor and Collector of Municipal Taxes, he had reason to believe that the income of the petitioner from the said immovable property chargeable to tax and had escaped assessment for the asst. year 1958 59 and he, consequently, issued the impugned notice. He contended that the conditions precedent to his jurisdiction to issue the impugned notice under S. 147(b) were, therefore, fulfilled and the impugned notice was a valid notice.

(3.) TURNING to the second question raised before us it was common ground between the parties that in issuing the impugned notice, the ITO was proceeding to act under S. 147(b). Now it is clear from the language of S. 147(b) that assessment or reassessment of the escaped income of an assessee under that sub section can be made by the ITO only if the ITO has in consequence of information in his possession reason to believe that such income has escaped assessment. Two conditions must be satisfied before the ITO can take action under S. 147(b) : (i) the ITO should receive, information after the original assessment and (2) in consequence of such information he should reasonably believe that income chargeable to tax has escaped assessment. Both these conditions were disputed by the petitioner but the question that arises in this petition is on regard to the first condition. The contention of Mr. Kaji on behalf of the petitioner was that the first conditions was not fulfilled in the present case since there was no information received by the ITO in consequence of which he could be said to have reason to believe that any income of the petitioner chargeable to tax had escaped assessment. The information relied on by the ITO was the intimation received by him from the Assessor and Collector of Municipal Taxes which we have already set out above. The question which, therefore, arises for determination is whether this intimation could be said to be information within the meaning of S. 147(b).