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TMI Blog1984 (12) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal assessment was completed on 31-8-1979. The internal audit raised four objections to the assessment. The ITO re- opened the assessment under section 147(b) with reference to two of the objections. They were: 1. Outgoings from the unsold portion of the building Marthanda assessed is Rs. 39,051, whereas the correct figure as per the assessee's statement and balance sheet is Rs. 70,367. 2. Building maintenance disallowed in the adjustment statement is Rs. 21,172 as against the correct figure of Rs. 26,219 as per balance sheet, The reasons recorded by the ITO in the order sheet on 20-2-1981 for re- opening the assessment-are as follows: "In the assessment, the outgoings added to ALY was less than the actual outgoings received by the assessee. Similarly, buildings maintenance dis-allowed is also not correct. Therefore, I have reason to believe that income chargeable to tax has escaped assessment. Proceedings under section 147(b) initiated. Issue notice under section 148." The two reasons recorded may conveniently be referred to as the outgoing factor and the maintenance factor. Both relate to the income from house property. The outgoing factor relates to a building known as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 9. On the other hand, the learned counsel for the assessee relied upon the decisions in East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326 (Cal.), CIT v. Dinesh Chandra H. Shah [1971] 82 ITR 367 (SC), CIT v. A. Raman Co. [1968] 67 ITR 11 (SC) and CIT v. Simon Carves Ltd. [1976] 105 ITR 212 (SC). These decisions only lay down that the reopen-ing of the assessment should be based on information, and that it cannot be sustained where there has only been a change of opinion on the basis of the report of the audit or otherwise. They do not lay down that the reopening has to be annulled, the moment it is found that the reasons originally recorded for the reopening are, subsequently, found to be non-existent. 10. We, therefore, accept the contention of the department on this aspect and hold that the reopening can be sustained if, at the time of the reassessment, the ITO bona fide thought that he had information, on the basis of which it could be said that income had escaped assessment. 11. The question for consideration, therefore, is whether at the time when he reopened the assessment, the ITO had information on the two factors mentioned earlier as a result of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment. Keeping this in mind, it has to be ascertained whether in the present case, the ITO had bona fide believed that an error has been committed which resulted in income escaping assessment. In this context, there is also merit in the submission made by the assessee that arithmetical or other mistakes, which are amenable for correction under section 154 of the Act, should not be made use of for the purpose of reopening the assessment and including in the income various other items which had escaped assessment earlier. Such a case may amount to the ITO resorting to a pretence for the purpose of reopening the assessment. 12. The first factor, relied upon by the ITO for reopening the assessment was the wrong computation of income from the Marthanda property. The Marthanda buildings in Bombay consist of a number of flats. A good number of them had been sold away by the assessee to tenants in occupation, who had also paid the full sale consideration. The title could not be transferred to them as in the conditions obtaining in Bombay, the transfer could be effected only to a co-operative society formed by the tenants. The assessee continued to collect the rent with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO could not have accepted what was pointed out by the audit. If he had examined the matter himself on the basis of what was pointed out by the audit, it would have been clear to him that there was no mistake and that the original assessment was correct. The reopening cannot, therefore, be sustained on this factor. 13. The second factor, on which the reopening was made, was that the amount for the maintenance of the building, which belonged to the assessee, disallowed in the adjustment statement, is Rs. 21,072 as against the correct figure of Rs. 26,219 shown in the profit and loss statement. The factor on the expenditure side of the profit and loss account with regard to building maintenance was as follows: Rs. Shiela Mahal. 14,905.68 Marthanda 11,262.79 Setalmond Palace 51.08 India House 2,500.00 Ramalayam 954.75 Lakshmi Nivas 950.00 Total 30,624.30 To this, the assessee added Rs. 250 being the fire insurance premium and showed the total amount as Rs. 30,874.30 in the recasting of the profit and loss account submitted along with t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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