TOLARAM GANGARAM Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) A short question arises in this petition, viz., whether the ITO had exceeded his jurisdiction in issuing notice for reassessment, vide his notice of March 10, 1980, for reopening the assessment for the asst. year 1973 74, in exercise of his powers under S. 147(a) of the IT Act, 1961. A few facts need be noticed in order to appreciate the question which has been raised in this petition.

(2.) S .Y. 2029 corresponding to the period from November 7, 1972, to October 26, 1973, was the previous year to the asst. year 1974 75. Similarly, S.Y. 2028 corresponding to the period from October 20, 1971, to November 6, 1972, was the previous year to the asst. year 1973 74. The petitioner assessee had derived income by way of share income from a partnership firm under the name and style of M/s Tolaram Brothers. The assessee was one of five owners having 1/5th share each in the property known as "Mira Palace" situate at Maninagar, Ahmedabad. It is common ground that the construction of the said property was completed some where in December, 1972. The total cost of construction of the said building was shown in the return filed for the asst. yr. 1974 75 at Rs. 1,64,991 on the basis of the valuation report which the assessee had obtained. The ITO concerned was of the opinion that the cost of construction as arrived at was not proper inasmuch as it was not only not stated but did not include the cost of electrification of the said property. He, therefore, called upon the assessee to show cause why 30per cent of the total cost should not be added and accordingly apportioned between the owners. The assessee by his letter of March 26, 1977, pointed out that the statement of cost did include the cost of electrification and the particulars furnished were true and complete. In spite of the assessee being able to show successfully that the cost did include the cost of electrification, the ITO decided to add Rs. 55,000 being 30per cent of the total cost and accordingly added Rs. 11,000 as the income of the assessee. The said amount reflected the assessee's 1/5th share.

(3.) BEING aggrieved by the order of the AAC, the assessee carried the matter in further appeal to the Tribunal. The Tribunal noted that it was the common case of the parties that the construction of the building in question was completed in December, 1972, that is, prior to the commencement of the financial year 1973 74, which fact was clear from the period of construction as shown in the valuer's report compiled and filed by the assessee. The Tribunal, therefore, held that the inclusion of the impugned amount in the assessee's total income could not, therefore, be sustained since it has to be considered as income of the financial year, that is, 1972 73, and could be treated, if at all, as undisclosed investment under S. 69 and, therefore, could not have been brought to tax in asst. year 1974 75. The Tribunal, therefore, allowed the appeal. It is this order which has prompted the ITO to issue notice for reassessment for reopening assessment for asst. year 1973 74, because, according to the Tribunal the impugned amount was the income of the financial year 1972 73, and, therefore, consequently liable to be taxed if at all in the asst. year 1973 74. The petitioner has, therefore, moved this Court for appropriate writs, orders or directions to quash and set aside the impugned notice and for restraining the ITO from holding reassessment proceedings.