1985 (8) TMI 39 - HC - Income Tax

Summary

Issues Involved:
1. Validity of reopening the assessment for the assessment year 1949-50 u/s 147(a) of the Income-tax Act, 1961.
2. Justification for the Tribunal's direction to reconsider the sources of the repayment of a loan amounting to Rs. 1,52,500.

Summary:

Issue 1: Validity of Reopening the Assessment u/s 147(a)
The Tribunal upheld the reopening of the assessment for the assessment year 1949-50 under section 147(a) of the Income-tax Act, 1961. The Income-tax Officer (ITO) had reopened the assessment on the grounds that the assessee, a Hindu undivided family (HUF), had unexplained investments in a house property at Deoghar, which ostensibly stood in the name of Lakshmi Devi. The ITO believed that the income represented by the unexplained investment had escaped assessment. However, the Appellate Assistant Commissioner (AAC) found that the assessee had disclosed all material facts during the original assessment, and the reopening was merely an attempt to remedy the ITO's own oversight. The High Court concluded that the initiation of the reassessment proceeding was invalid and without jurisdiction, as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.

Issue 2: Reconsideration of the Sources of Loan Repayment
The Tribunal directed the AAC to reconsider the sources of the repayment of a loan amounting to Rs. 1,52,500, which was deposited in the passbook of Lakshmi Devi. The AAC had initially held that the reassessment proceeding was initiated only for considering the unexplained investment in the house property and not for the sum of Rs. 1,52,500. The High Court agreed with the AAC, stating that the ITO had no justification to include the sum of Rs. 1,52,500 as unexplained income of the assessee without first calling upon Lakshmi Devi to explain the source of her income. The High Court further noted that the reassessment proceeding was initiated without jurisdiction and in contravention of the provisions of section 147 of the Income-tax Act.

Conclusion:
The High Court answered both questions in the negative, against the Revenue and in favor of the assessee. The reopening of the assessment for the assessment year 1949-50 under section 147(a) was deemed invalid, and the direction to the AAC to reconsider the sources of the repayment of the loan was also unjustified. The reference was thus answered in favor of the assessee with costs.