S.S. Mehra, Judicial Member -
(1.) THE appellant-assessee by this appeal under Section 253(1) of the Income-tax Act, 1961 ("the Act"), challenges the first appellate order dated 3-12-1980 of Shri Rajendra Mohan, the learned Commissioner (Appeals), for the assessment year 1967-68, inter alia, on the following ground :
THE learned Commissioner (Appeals) erred in holding that proceedings initiated under Section 148 read with Section 147(a) are valid.
(2.) The assessee is a limited company by status and its business is banking. The relevant accounting period is the calendar year ending 31-12-1966. The original assessment appears to have been completed some time in 1970. The learned ITO, thereafter, felt reason to believe that by reason of omission or failure on the part of the assessee to disclose truly and fully all material facts necessary for each assessment year, the income chargeable to tax had escaped assessment. The omission on the part of the assessee is said to be that it had not shown the appreciated amount of Rs. 61,574 in its income and in fact the same was directly credited to the contingency fund account. In these circumstances, the learned ITO initiated reopening proceedings under Section 147(o) of the Act, with the prior approval of the learned Commissioner (Appeals). In reply to the notice under Section 148, the assessee appears to have written a letter on 18-12-1975 staling that the return already furnished may be treated as return in compliance to the said notice On further insistence, the assessee filed a fresh return on 4-2-1976 confirming the contents of the earlier return. In compliance with the notice under Section 143(2) of the Act, Shri M.N. Joshi, the learned advocate on behalf of the assessee, appeared before the learned ITO. The validity of initiation of proceedings under Section 147(a) was objected and it was further mentioned that all material facts had since been disclosed to the learned ITO in the course of the original assessment, and that in terms of the statement showing contingency fund-tiled along with the original return-a clear mention was made of the said sum of Rs. 61,574 acquired or received as "amount on account of devaluation", there was no failure on the part of the assessee and that the situation did not warrant the initiation of the reopening proceedings. The learned ITO, Shri P.N. Bansal, did not accept the contentions raised before him relying upon the ratio in the case of Malegaon Electricity Co. (P.) Ltd. v. CIT  78 ITR 466 decided by their Lordships of the Supreme Court and initiated proceedings under Section 147(a) with the following observations :
The contention of the assessee cannot be accepted as the assessee in the course of the original assessment did not disclose the appreciation in its circulating capital amounting to Rs. 61,574 in the profit and loss account nor was this income claimed to be specifically exempt under any particular provision of the law. The figure appeared in the contingency fund account and it could, of course, have been dug out by the ITO by proper scrutiny but the fact remains that it was not discovered by the ITO at that stage. Further the assessee did not bring this item specifically to the notice of the ITO. As the ITO did not apply his mind to its taxability in the course of the original assessment, it cannot be said that it was a case of change of opinion on his part. The facts of the case are on all fours with those obtaining in the case of Malegaon Electricity Co. (P.) Ltd. v. CIT  78 ITR 466 (SC). As observed in the said case, if any part of the receipts could be assessable then it is the duty of the assessee to include it in the return and its failure to do so would amount to failure on its part to disclose fully and truly the material facts necessary for its assessment and would bring its case within the scope of Section 147(0). As such, proceedings under Section I47(a) were validly initiated in this case.
A sum of Rs. 61,574 was consequently included in the total income of the assessee during the reopening proceedings by the learned 110, Shri P.N. Bansal, vide his assessment order dated 20-3-1980 under Section 147 read with Section 144B of the Act.
(3.) THEREAFTER, the said action of the learned ITO was challenged by the assessee. All the contentions, earlier raised before the learned ITO, appear to have been reiterated and repeated. The learned Commissioner (Appeals), Shri Rajendra Mohan, could not agree with the contentions of the assessee, and, in fact, confirmed the learned ITO's action in the following manner :
I am afraid the contention of the appellant-company is not acceptable. Though what the appellant-company says with regard to the furnishing of the details of contingency fund account is correct, the entries made in this account throw absolutely no light on the nature of the receipt. In this account, the narration is-"amount on account of devaluation Rs. 61,574". This entry gives an impression as though it is some kind of a transfer entry. The amount of Rs. 61,574 was not credited to the P & L account. From what follows in ground No. 2 below, it would be abundantly clear that the assessee-company itself does not know the nature of receipt even now, i.e., after 14 years, it cannot explain as to how and when this profit arose. Under the circumstances, lam not inclined to support the contention that there was no omission or failure on the part of the appellant while furnishing the return. The assessment is accordingly, held to be valid. No relief is due to the appellant on this account.;