1985 (4) TMI 99 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of reopening assessments under section 147(a) of the Income-tax Act, 1961.
2. Obligation to disclose marriage expenses.
3. Validity of reassessments and limitation period under section 153(2)(b).
4. Merits of the additions made by the Income-tax Officer (ITO).

Detailed Analysis:

1. Jurisdiction of Reopening Assessments under Section 147(a):
The primary issue was whether the reopening of assessments for the years 1974-75, 1975-76, and 1976-77 under section 147(a) was justified. The assessee argued that he did not suppress any material facts necessary for the original assessments. The Income-tax Officer (ITO) had already been informed about the marriage expenses during the assessment for the year 1973-74. The Tribunal observed that the ITO was aware of the marriage expenses before completing the original assessments, thus the assessee was not under any obligation to disclose this fact again. Citing the Supreme Court decision in Gemini Leather Stores, it was held that the ITO's oversight did not justify reopening under section 147(a). Consequently, the Tribunal concluded that the reopening was without jurisdiction as one of the basic conditions for assuming jurisdiction under section 147(a) was not fulfilled.

2. Obligation to Disclose Marriage Expenses:
The assessee contended that there was no obligation to disclose marriage expenses in the return as there was no query to that effect. The Tribunal agreed, referencing the decision in Durga Sharan Udho Prasad, which stated that non-disclosure of a fact not required by law does not amount to non-disclosure of a primary fact. The Tribunal further noted that there was no direct nexus or live link between the marriage expenses not shown in the accounts and the belief of income escaping assessment, as required by the Supreme Court in ITO v. Lakhmani Mewal Das.

3. Validity of Reassessments and Limitation Period under Section 153(2)(b):
The assessee argued that the reassessments were time-barred. However, the Tribunal found that the ITO had proceeded under section 147(a) and thus the reassessment proceedings were within the limitation period prescribed under section 153(2)(b). The absence of section 69C for the first two years and its presence in the third year did not impose any additional burden on the assessee to disclose higher estimates by the Revenue.

4. Merits of the Additions Made by the ITO:
On the merits, the Tribunal found that the ITO had ignored the withdrawals of Rs. 35,000 from the bank towards marriage expenses. The ITO did not provide a clear basis for the estimated additional expenses, nor did he specify how much of the expenses were considered unexplained. The Tribunal concluded that the additions were based on pure surmises and lacked any basis. Thus, the additions made by the ITO were liable to be deleted.

Conclusion:
The Tribunal held that the reassessments made by the ITO were bad in law and canceled them. The appeals were allowed in favor of the assessee.