STERLING MACHINE TOOLS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, M/s. Sterling Machine Tools, Agra, was a partnership firm consisting of 4 partners including Sri Satish Chandra. THE assessee carried on business of manufacture and sale of centering machines and also purchase and sale of spare parts for the assessment year 1965-66. For the previous year ended December 15, 1964, the assessee filed a return showing an income of Rs. 34,148-43 on sales of Rs. 1,86,000. THE ITO made the assessment on August 5, 1966, and computed the total income at Rs. 37,218. During the previous year relevant to the assessment year 1966-67, the assessee carried on the same business and during the course of assessment for that year, on enquiry from the Vigilance Bureau and the Boards of Experts, the ITO found that the actual cost of a centering machine came to Rs. 7,331, whereas the assessee claimed the same at Rs. 9,432. When Satish Chandra, partner, was confronted with that report he gave a note in writing on May 15, 1968, to the ITO stating that though his cost was much more, yet in view of the opinion of the experts he was willing to his income being worked out on that basis. Because of the aforesaid report of the Board of Experts and the note of Satish Chandra, the ITO initiated proceedings under s. 147(b) of the I.T. Act, 1961, for the assessment year 1965-66 and issued a notice to the assessee under Section 148. Pursuant to that notice the assessee filed a return showing an income of Rs. 37,218, that is the figure which had been determined in the original assessment. THE ITO made the reassessment and in doing so added a sum of Rs. 98,028 representing the difference in cost in the price of the machines as per the note of Satish Chandra and the opinion of the Board of Experts, and as per the assessee's books which came to Rs. 8,169 per machine, and thus the total income computed came to Rs. 1,35,296.

(2.) THE assessee appealed. THE AAC had, in the appeal filed by the asses-see against the assessment order for 1966-67, held that the note dated May 17, 1968, given by Sri Satish Chandra was null and void in law and so in his opinion the initiation of proceedings for the year under consideration was bad and invalid and hence he annulled this reassessment. Being aggrieved, the revenue took up the matter in appeal before the Appellate Tribunal. THE Tribunal considered this appeal along with three other appeals relating to the assessment year 1966-67. THE Tribunal did not agree with the AAC on the question of the validity of the note dated May 17, 1968, given by Satish Chandra and held that it was a perfectly valid document which had been written after due deliberation. Thus, in the opinion of the Tribunal the report of experts and the aforesaid letter of Satish Chandra constituted information within the meaning of Section 147(b) and the initiation of proceedings thereunder was thus perfectly justified. However, coming to the quantum of the income assessed, the Tribunal found that in the first instance the AAC had not dealt with that aspect and, apart from that, the aforesaid admission made by Satish Chandra was relevant to the assessment year 1966-67 and for 1965-66 at best it could be treated as a piece of evidence and not as admission and hence the matter was remanded to the ITO to recompute the income. Now, at the instance of the assessee, the following question has been referred by the Tribunal for our opinion :

(3.) SECTION 147 of the Act, in so far as it is relevant for our purpose, reads: