BALASUBRAHMANYAN,J. - (1.)THE question of law referred for our opinion in this income -tax reference is as follows :
"Whether, on the facts and in the circumstances of the case, the reassessment made by the ITO to bring to tax the capital gains which were said to have accrued to the assessee, on the sale of his business, M/s Chandamama Publications in favour of M/s Sarada Binding Works, for the asst. yr. 1959 -60 under S. 147(a) of the IT Act was valid ?"

(2.)THE assessee was assessed to income -tax under the original assessment for the year 1959 -60 on June 14, 1960, on a total income of Rs. 71,555. This assessment was subsequently rectified when a mistake which appeared in the record was found out. That, however, need not concern us in this reference. Subsequently, on November 11, 1963, a notice under S. 148 of the IT Act was issued by the ITO to the assessee on the score that a part of the income had escaped assessment When the assessment was originally made for the assessment year concerned. By this time 4 years had elapsed from the commencement of the asst. year 1959 -60. However, the reopening of the assessment, if it were under S. 147(a), was quite within time. The ITO purported to reopen the assessment only under S. 147(a) and not under S. 147(b). The officer recorded a finding that income had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly the facts material for the assessment. The particular amount of income which, according to the ITO, had not been properly disclosed by the assessee in the original assessment proceedings related to the value of certain perquisites, which the assessee was in receipt of as a member of a closed company of which lie was the managing director. However, after reopening the assessment under S. 147(a) of the Act for the purpose of including the value of the said perquisites as part of his assessable income, the ITO also included another sum, as capital gains, in the amount of Rs. 1,50,000. This amount represented the capitalisation of annual payments which the assessee was entitled to get in consideration of the transfer of his interest in a publication firm called Chandamama Publications. It may be stated that the facts relating to the transfer of this publication business as well is the particulars of consideration payable to the assessee thereunder had also been the subject of detailed examination by the ITO not only in this assessment year during the course of the original assessment proceedings but also in the subsequent assessment years where the original assessments had already been completed. In all those proceedings the view taken by the ITO was that what the assessee got out of the transaction of transfer of the publication business was not realisation of any capital but only the substitution of a service of annual payments in consideration of parting with a capital asset. It was on that basis that the ITO had proceeded to tax the assessee every year in respect of a fixed payment plus a percentage on the profits in the publication business. Notwithstanding this pattern of all the original assessments, following the assessee's transfer of the publication business, when the officer reopened the assessment for 1959 -60 under S. 147(a) of the Act, he was disposed to give a different interpretation of the nature of the transaction. He held that the publication business in the hands of the assessee was a capital asset, as such, and since it was transferred by him, whatever he obtained in consideration of that transfer must be regarded as a capital gain. The capital gain, according to the ITO, was to be derived by ascertaining the discounted value of the series of annual payments which the assessee was entitled to get in the transfer. The officer computed the discounted value to be Rs. 1,50,000 which he regarded as the net capital gain to be brought into the assessment for 1959 -60 since the transfer took place during the relevant previous year. When the reassessment was ultimately completed the ITO added this amount of Rs. 1,50,000 also as part of the total income.
This reassessment was objected to by the assessee in appeal both on merits and on the ground that the officer had no jurisdiction to reopen the assessment. The assessee contended generally that the reopening of the assessment under S. 147 of the Act was invalid. The assessee also contended that, in any case, the inclusion of Rs. 1,50,000 could not be sustained either under s. 147(a) or under S. 147(b). According to the AAC, there was no warrant for the inclusion of Rs. 1,50,000 since all the material facts relating to the transaction of sale by the assessee of the publication business were already fully disclosed before the Department even in the original assessment proceedings and it could not be said that the ITO became aware of the assessability of Rs. 1,50,000 only by virtue of subsequent information which came before him after the original assessment was completed.

(3.)THE Department took the matter in appeal before the Tribunal contending that when once the reassessment was sustained as having been properly reopened under S. 147(a), the entire assessment process was again at large and the officer would have ample jurisdiction to go into all income which had not already found its place in the original assessment. The Tribunal rejected this contention of the Department. The Tribunal proceeded to hold that even assuming that S. 147(b) can be invoked in this case, the officer did not come by any subsequent information, subsequent to the original assessment, so as to enable him to exercise his powers under the said provision. The Tribunal, accordingly, dismissed the Departmental appeal and sustained the order of the AAC. It is in these circumstances, that the Tribunal had made a reference to this Court on the question of law which we have set out in the beginning of this judgment.