DINKARRAI ANANTRAI MANKAD Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner assessee by this petition has prayed for appropriate writs, orders and directions to quash and set aside the notice dated June 29, 1984, issued by the ITO, Circle II, Ward 1, Rajkot, respondent herein under S. 148 r/w S. 147(b) of the IT Act, 1961, and restraining him from reopening the assessment for the asst. year 1981 82, which was completed by the assessment order dated June, 17, 1982. A few facts need be noticed in order to appreciate the circumstances which resulted in the impugned notice for reassessment.

(2.) THE petitioner purchased a building in Rajkot on April 2, 1962, for a sum of Rs. 37,000. It appears that in the financial year 1967 68, the petitioner made substantial alterations and additions to the said building at a cost of Rs. 55,700. The building was sold thereafter by him on September 24, 1980, for an aggregate amount of Rs. 1,64,000. In the course of the assessment proceedings for the asst. year 1981 82, the petitioner filed a statement of income showing long term capital gain of Rs. 49,730 as per the computation contained in the said statement. It appears that the petitioner had sought to deduct from the amount of sale proceeds, a sum of Rs. 37,000 being the original cost of acquisition and a further sum of Rs. 55,700 being the cost of additions and alterations, in all aggregating to Rs. 92,700. The, net balance was, therefore, shown at Rs. 71,300 and claiming statutory deduction of Rs. 5,000, a further deduction was claimed at the rate of 25per cent which worked out to Rs. 16,570 as permissible in law and thus was shown the net long term capital gain of Rs. 49,730. It is claimed by the petitioner that in the course of the assessment for the year 1981 82, the petitioner had satisfied the ITO concerned about the cost of additions and alterations carried out by him in the financial year 1967 68. The additional construction was to the extent of 1,239 sq. feet and he had furnished the necessary details and also produced the relevant pass book to substantiate the cost of the said additional construction. He had also filed an affidavit in Gujarati setting out the necessary relevant facts in support of his computation. The petitioner claims that the ITO concerned accepted the computation of long term capital gain as shown by the petitioner and completed the assessment accordingly by his order of June 17, 1982. He was, therefore, surprised to receive the impugned notice which he received on July 23, 1984. The petitioner on receipt of this notice applied for extension of time for filing the return and on inquiry he learnt that the reopening of the said assessment was on the basis of an audit note which had opined that the cost of additional construction arrived at by the petitioner was on the higher side and, therefore, the assessment should be reopened. It is in these circumstances that the notice for reassessment has been sought to be impugned.

(3.) IN response to the rule issued by this Court, the respondent officer has filed reply affidavit stating, inter alia, that the internal audit had objected to the details of expenses in respect of the development of the property to the extent of Rs. 55,700 not having been put on record before completion of the assessment on June 17, 1982, and, therefore, the impugned notice was required to be issued, since the assessee had failed to disclose full, true and all the necessary material and details in respect of the development of the house property as a result of which capital gains chargeable to tax bad escaped assessment.