COMMISSIONER OF INCOME TAX Vs. KILLICK INDUSTRIES LIMITED

JUDGEMENT

(1.) THIS is a reference under S. 66(2) of the Indian IT. Act, 1922 (hereinafter referred to as "the Act"), and the question that falls for our consideration is whether the action initiated by the ITO under s. 34(1)(b) of the Act for reassessment of the income was competent.

(2.) THE assessee is a company and the assessment year is 1957 58. The assessee purchased a building by name "Recluse". A part of the said building was used by the assessee for its business purposes and was occupied by its mining department, and the rest of the building was in the occupation of tenants ever since its purchase. The rental income from the said building amounting to Rs. 10,271 was credited by the assessee to the profit and loss account of its business. Having treated the said income as its business income, the assessee claimed deductions of certain expenses in the computation of the said income, which deductions were disallowed and added back by the ITO for reasons given in his original assessment order dated May 25, 1958. Since the income from the said building was treated and assessed to tax as business income under S. 10 of the Act, the ITO also allowed depreciation on the cost of the building.

(3.) AFTER thus reopening the assessment, the ITO recomputed the income from the said building under S. 9 of the Act. Aggrieved by this reassessment, the assessee filed an appeal to the AAC. Before the Asst. CIT, the assessee raised two objections. The first objection was that even at the time of filing the original return, the rent received from the property was shown as such, and the assessment was completed after the facts of the case were fully gone into by the ITO. There was no fresh information which came into the possession of the ITO thereafter to warrant reopening of the assessment under S. 34 (1)(b) of the Act. Whatever information was necessary for the proper completion of the assessment was already before the ITO and the reopening of the assessment was done merely on account of the change of opinion on the part of the ITO, there being no change in the facts or material before him. The second objection was on merits, whereby the assessee challenged the correctness of the computation of the income under S. 9 of the Act. The AAC found that the assessee had, along with the return of the income, filed the concerned profit and loss account, and Item No. 5 shown in the balance sheet mentioned "Recluse building rent receivable Rs. 10,271 4 0". He also noticed that in reply to the ITO's letter dated February 11, 1958, the details furnished by the assessee by its letter dated February 25, 1958, in respect of repairs to the building, were as follows :