RAJAN Y Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) IN this writ petition under Art. 226 of the Constitution of INdia for the issue of a writ of prohibition prohibiting the respondent herein from reassessing the income of the petitioner as per the notice issued under S. 148 of the IT Act, 1961, the question that falls for consideration is : "Whether the respondent has jurisdiction to do so on the facts and circumstances of the case ?"

(2.) THE petitioner's income was assessed to tax for the years 1961- 62, and for the subsequent years upto 1964-65. THEreafter, on a report made by the inspector of income-tax that the wife of the petitioner had constructed a house, ITO C-III Ward, Hyderabad, served a notice under S. 139 (2) of the Act on the wife of the petitioner for the asst. yr. 1962-63. In pursuance of the said notice, she submitted returns of income for six asst. yrs. 1959-60 to 1964-65 and claimed that the construction of the house was started in 1958 and completed before 31st March, 1961, and further claimed that her income be spread over these years. In the course of the assessment proceedings for these years, the petitioner was examined and also other factors were taken into account and the explanation of the petitioner's wife was accepted. Her income for these years was assessed and the tax determined. THEreafter, the ITO, M. P. P. Circle "A" Ward, Hyderabad, the respondent herein, issued the impugned notice 133-R/61-62 dated 24th November, 1965. This notice was preceded by another notice, G. I. No. 133/61-62, dated 5th November, 1965, in which the petitioner was informed that since his wife apparently has no independent source of income, the investment made by her in the house in all probability must have belonged to him, and that he, therefore, proposed to initiate action under S. 147 of the Act to reopen his assessment. from 1961- 62 onwards and to include therein the investment of the construction of the house and the rental income therefrom. By this notice, the petitioner was called upon to state his objection, if any, to the above proposal before 18th November, 1965. THE petitioner accordingly filed his objection on 24th November, 1965, stating that his wife's assessment has been completed by the ITO, C-III Ward, wherein the explanation of his wife was accepted and also disclosed her identity that she is the wife of the petitioner, that the present proposal to reopen the assessment and include the said income was untenable and requested the respondent officer to drop the proceedings. Notwithstanding the above, the impugned notice was issued. In the counter-affidavit, the issuance of this notice is sought to be justified on the ground that the assessment of the wife's income and that of the petitioner's income was completed by two separate officers, one by the ITO, C-III Ward, and the other by the ITO, M. P. P. Circle "A" Ward, and, secondly, on the ground that, although the petitioner's wife was assessed on her own statement that she had received income which is above the exemption limit, that did not preclude the respondent herein from taking into account the fact that the petitioner's wife did not have any independent source of income, that that income was, in all probability, the income of the petitioner and the investment made by the petitioner's wife in the construction of the house must have been from out of the income of the petitioner, and that therefore not only the investment made by her in the house but also the income derived from the rents of that house, must be deemed to be the income of the petitioner which has escaped assessment during the relevant years. THEse facts constituted "information" which was sufficient to vest jurisdiction in the ITO under S. 147(b) of the Act to reopen the assessments which are within four years of the impugned notice.

(3.) HERE we are not concerned with cl. (a) of S. 147, for, it is nobody's case that the petitioner had omitted or failed to fully and truly disclose all material facts necessary for the assessment of his income during the previous assessment years. It is the specific case of the Revenue that the "information" gathered by it in the course of the assessment proceedings of the petitioner's wife which information was communicated to the present respondent by the other ITO is the basis for issuing this notice. The notice itself does not disclose the "information" on which it is based. But, as already noticed, it is preceded by a notice dated 5th November, 1965, in which the proposal to reopen assessment was made and objections of the petitioner were invited. The following facts are clearly stated in the said notice : (1) That it has come to the notice of the respondent that the petitioner has constructed a house in Gandhinagar Colony by the end of the financial year 1960-61 in the name of his wife, Srimathi Ramarathnamma. (2) That the cost of the construction of the house amounted to Rs. 35,000 and that it was made from the gift of Rs. 15,000 made to her by her father in 1945 at the time of her marriage and accrued interest thereupon up to the year 1958 for which no proof could be adduced. (3) That since the petitioner's wife apparently was not having any source of income the investment in all probability must have flowed from the petitioner. It is on these grounds that the respondent proposed in that notice to initiate action under S. 147 of the Act to reopen the petitioner's assessment from 1961-62 onwards so as to include therein, (a) the investment of the construction of the house, and (b) the rental income therefrom. A close reading of the said notice would disclose that the information in the possession of the respondent is about the completion of the house by the end of the financial year 1960-61, i.e., before 31st March, 1961. That was a fact which was asserted by the petitioner's wife and accepted by the ITO, C-III Ward. The second fact mentioned in the notice, namely, that the investment was that of the petitioner's wife was also accepted by the concerned officer, although no proof of the actual gift made by her father at the time of marriage was forthcoming. Still it was on that basis that the house was treated to have been constructed by her and the income therefrom was treated to be her income and she was assessed to tax. It is not as if the identity of the assessee therein was not disclosed. In fact the officer concerned knew that the petitioner herein was the husband of the assessee and the petitioner was also present before the officer during the enquiry.