JUDGEMENT
A. Satyanarayana, Accountant Member -
(1.)THIS appeal filed by the assessee is against the order of the AAC dated 5.12.85 for the assessment year 1976-77 for which the previous year ended on 31.3.76.
(2.)According to the ITO, in the return of net wealth for the assessment year 1976-77 the assessee had shown jewellery valued at Rs. 1,03,557 for the first time. The assessee claimed that the jewellery was disclosed under the Voluntary Disclosure of Income & Wealth Act, 1976. But from the certificate under Section 8(2) of the said Act, it was found that no such jewellery was disclosed. As such, proceeding under Section 147(a) was initiated. The assessee furnished the return of income on 2.8.83 showing a total income of Rs. 5,370. In the assessment proceedings the assessee's counsel, Shri A.K. Sinha stated that by mistake the word "jewellery" was not mentioned in the disclosure petition and that subsequently, the assessee made a petition before the CIT for amendment of the certificate under Section 8(2) of the above Act. The ITO made a reference to the CIT seeking clarification. The assessee's petition had been disposed of by the CIT. He has decided that there was no ground for interference in the matter of certificate under Section 8(2) of the Voluntary Disclosure of Income and Wealth Act, 1976. This was communicated to the assessee by letter dated 17.1.85. In order to give the assessee an opportunity to explain the acquisition of the jewellery a notice under Section 131 was issued to the assessee. She appeared before the ITO and stated that part of the jewellery was received by her at the time of her marriage. She had given a list of such jewellery. From the list it was found that there were eight items the value of which was Rs. 5,127 in 1942 when she was married. The value in 1975 is Rs. 31,508 as per Valuer's Report dated 29.12.75. The ITO noted that it was customary in our country to give the bride jewellery and ornaments at the time of marriage. Considering the same he accepted the jewellery valued at Rs. 31,508 as marriage gifts. Regarding the remaining jewellery the assessee contended that they were received by her as presents from her husband and relatives on different occasions and that those ornaments were often remade by her. She was unable to produce any evidence in support of the acquisition of these ornaments. So, the value of the remaning jewellery amounting to Rs, 72,049 was deemed to be her income for the assessment year 1976-77 under Section 69A the ITO held that the assessee would not get the immunity under the Voluntary Disclosure of Income and Wealth Act, 1976. In that view, he included Rs. 72,049 in the total income of the assessee under the head "Other Sources" in the assessment order passed under Section 143(3)/147(a) dated 12.3.85. Aggrieved by the said assessment order the assessee preferred an appeal before the AAC.
4. Before the AAC it was contended on behalf of the assessee that there was a mistake in mentioning only "silver untensils" in the certificate under Section 8(2) when in the disclosure petition under Section 3(1) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975 the assessee mentioned silver utensils and gold and diamonds jewellery for Rs. 42,387. It was, therefore, urged that there being mistake in the certificate under Section 8(2) the value of the jewellery amounting to Rs. 72,049 should be excluded from the total income of the assessee since it was covered by the disclosure made by the assessee as stated already. The AAC rejected the contentions of the assessee and held as under:-:
I have considered the contentions offered on behalf of the appellant as above and I am unable to agree to the same. It is seen from the certificate under Section 8(2) issued under the signature of the C.I.T. W.B.I, Cal. that the appellant disclosed silver utensils valuing Rs. 42,387. Nowhere in the certificate it is mentioned that the silver utensils valuing Rs. 42,387 also included the value of gold and diamonds and jewelleries. Further in response to appellant's petition to the C.I.T. for amendment of the certificate under Section 8(2) the C.I.T. declined to make any amendment in the said certificate since there was no ground for such amendment.
In view of all these reasons the appellant's contention that the jewellery valuing Rs. 1,03,557 was covered by the above disclosure petition cannot be accepted. Since there was no evidence as to the acquisition of the value of the jewellery amounting to Rs. 72,049 the I.T.O. was justified to treat the same as appellant's income from undisclosed source under Section 69 A of the Income-tax Act, 1961.
The I.T.O.'s action is accordingly confirmed.
It was only also contended before the AAC that the condition precedent to the initiation of the proceedings under Section 147(a) were not satisfied, that therefore, the re-assessment made under Section 147(a) was ab initio void and without jurisdiction, that all the relevant facts and particulars and silver utensils, gold and diamond jewellery were disclosed at the time of original assessment and that, therefore, the decision of the ITO to include the jewellery as undisclosed income of the assessee was a mere change of opinion which was not permitted under Section 147. The AAC upheld the validity of the re-assessment by observing as under:-
I have considered the contention of the Authorised Counsel of the appellant It transpires from the relevant assessment records of the appellant that the income-tax return was filed by the appellant on 9-5-78 and the original assessment was completed on 5-8-78. As per description given in the balance sheet filed along with the income-tax return it is seen that the appellant disclosed silver utensils, gold, jewellery valuing Rs. 42,387. The I.T.O. accepted this position. It is further seen that the appellant filed her wealth-tax return on 9-5-1978. She filed a statement of wealth along with her wealth-tax return showing the value of jewellery at Rs. 1,03,557. The wealth-tax assessment was taken up later and completed on 27-3-1981. The value of the jewellery which was disclosed by the appellant at Rs. 1,03,557 in her wealth-tax return was estimated and included in her assessed net wealth at Rs. 1,10,000. Since the value of the jewellery amounting to Rs. 1,03,557 was not disclosed in her Income-tax return, the assessment of which was completed much earlier to the assessment of her wealth-tax, the ITO had no occasion to consider the said jewellery at the time of the original income-tax assessment It is only in the course of assessment of wealth-tax which was completed on 27-3-1981 the I.T.O. came to know that the appellant had jewellery valuing Rs. 1,03,557 in the year under present appeal. In the recorded reasons for initiation of proceedings under Section 147(a) the I.T.O. has noted vide order sheet dated 27.3.1981 that it come to his knowledge that the wealth-tax return for the assessment year 1976-77 filed by the assessee on 9-5-1976 that the jewellery worth Rs. l,03,557 was not disclosed in the balance sheet for the assessment year 1976-77. He also found that the certificate under Section 8(2) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975 shows only silver utensils worth Rs. 42,387 was disclosed by the appellant. He, therefore, initiated proceedings under Section 147(a) and issued notice under Section 148. It is evident from the above facts that the I.T.O. had no occasion to consider the value of jewellery amounting to Rs. 1,03,557 which was disclosed for the first time in the wealth-tax return for the year and which come to the knowledge of the I.T.O. when the wealth-tax assessment was taken up and completed on 27-3-1981 much later to the date of completion of the income-tax assessment which was completed on 5-8-1978. Accordingly, I do not agree to the contention offered on behalf of the appellant before me that inclusion of the value of jewellery of Rs. 72,049 was made by the I.T.O. by mere change of opinion. The facts of the case go to show that the appellant had filed to disclose fully and truly all material facts necessary for her original income-tax assessment for the year under consideration. Therefore, I consider that the conditions necessary for initiation of proceedings under Section 147(a) have been satisfied in this case. The I.T.O. was accordingly justified in initiating the proceedings under Section 147(a).
I, therefore, hold that the re-assessment made by the ITO under Section 147(a) is according to law and hence valid. The appellant's ground in this regard is accordingly rejected. The assessment, therefore, stands confirmed.
Aggrieved by the said order of the AAC the assessee preferred the present appeal before the Tribunal.
4. The assessee's counsel filed a Paper Book of 20 pages containing, inter alia, copy of the covering letter dated 31-12-75 addressed to the Commissioner while filing the petition under Section 3(1) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975, Certificate of the Commissioner under Section 8(2) dated 31-12-77, copy of the assessee's petition dated 25-2-82 for rectification of the certificate under Section 8(2), copy of the CI.T.'s letter dated 17-1-85 declining to interfere with the certificate dated 31-12-77 and copy of the Balance Sheet as on 31-3-76. The arguments of the assessee's counsel were to the following effect: In the Voluntary Disclosure Petition filed before the CIT it was clearly stated at paragraphs 6 and 9 that Rs. 42,387 represents silver utensils, gold and diamond jewellery. But the Certificate under Section 8(2) dated 31-12-77 issued by the CIT showed only "silver utensils Rs. 42,387". The assessee by her petitions dated 25-2-82 and 4-12-84 requested for rectification of the Certificate under Section 8(2). The CIT by his letters dated 10-11-82 and 17-1-85 rejected the assessee's petitions for rectification observing that there was no ground for interference in the matter of Certificate under Section 8(2) dated 31-12-77. The assessee had filed Profit and Loss Account and Balance Sheet for the assessment year 1976-77, before the original assessment was made on 5-8-78, under Section 143(3). In the Balance Sheet "Silver utensils, gold jewellery" were shown at Rs. 42,387 on the assets side of the Balance Sheet. In the Wealth-tax return for the assessment year 1976-77 valuation of jewellery was shown at Rs. 1,03,557. This was not shown as an investment. The valuation cannot be the basis for reopening of the assessment. The ITO wrongly applied Section 69A in the assessment made under Section 147(a). Even the proceedings under Section 147(a) were unlawfully initiated. There was no omission on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the assessment year 1976-77 when the original assessment was made. Conditions for invoking Section 69A were not fulfilled. Income chargeable to tax has not escaped. So, Section 69A cannot be brought and applied in the assessment made under Section 147(a). Reliance is placed in the cases of Durga Sharan Udho Prasad v. CIT [1976] 103 ITR 270 (Pat.), Rasiklal Jivanlal Shah v. ITO [1982] 133 ITR 476 (Cal.) and Smt. Tarawati Debi Agarwal v. ITO [1986] 162 ITR 606 (Cal.).
5. The Departmental Representative filed Photostat copy of the order sheet where the reasons under Section 147(a) were recorded on 27-3-81. Photostat copy of Certificate under Section 8(2) dated 31-12-77 and Photostat copy of the Balance Sheet for the assessment year 1976-77 filed by the assessee before the ITO. The arguments of the Departmenal Representative were to the following effect: In the Paper Book filed by the assessee, the assessee has not included copy of the form of declaration under Section 3(1) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975 in "Form-A". He has only given the covering letter filed along with the printed "Form-A" filled in and signed by the assessee. In the printed "Form-A", the words "Silver utensils" only were written. Subsequently, the words "gold ornaments and jewelleries" were interpolated in a different ink. This is evident from a mere look at the "Form-A". The original Form-A is produced herewith before the Tribunal for its perusal and consideration. Even the letter enclosed along with the printed Form A there was interpolation. The words "gold and diamond jewellery" were subsequently inserted in paragraphs 6 and 9. The said enclosure letter dated 31-12-75 from the Commissioner's file is also produced herewith before the Tribunal for its perusal and consideration. Copies of the same are also filed herewith for the record of the Tribunal. Subsequent to the making of original assessment on 5-8-78, the ITO while making the Wealth-tax assessment of the assessee for the assessment year 1976-77 noticed that certificate under Section 8(2) revealed that only silver utensils of worth Rs. 42,387 were disclosed by the assessee. As such, it appeared to the ITO that the assessee failed to disclose the jewellery before the department. Hence, proceedings under Section 147 were initiated. Notice under Section 148 dated 27-1-81 was served on the assessee on 31-3-81. After that, the assessee by her petition dated 2-4-81 requested the Commissioner for rectification of Certificate dated 31-12-77 issued under Section 8(2). If there was any mistake really in the Certificate dated 31-12-77, the assessee would have brought it to the notice of the Commissioner immediately on receipt of the Certificate on, 10-1-78. This was not done till April, 1981. Three full years, namely, 1978,79 and 80 have elapsed before the assessee made the petition before the Commissioner on 2-4-81.
Hence, the assessee's action in moving the Commissioner for rectification of the Certificate under Section 8(2) is only an afterthought. Further, the assessee's counsel in the re-assessment proceedings clearly admitted that the word "jewellery" was not mentioned by mistake in the disclosure petition. In fact, the jewellery was not disclosed in the Voluntary Disclosure Petition. Only silver utensils were disclosed. The cases cited by the assessee's counsel are all distinguishable on facts. In the circumstances, the order of the AAC should be confirmed.
6. We have considered the rival submissions, papers filed before us and the case law cited. The assessee filed the return of income and return of wealth for the assessment year 1976-77 on 9-5-78. The original assessment was made on 5-8-78 under Section 143(3). Before the ITO the assessee had filed the Balance Sheet for the assessment year 1976-77. The ITO refers to the said Balance Sheet in his assessment order dated 5-8-78 and observed that the Balance Sheet for the assessment year 1976-77 reveals an addition of Rs. 4,600 by cash, that the assessee was unable to produce any evidence in regard to source of this cash credit and that the said sum is treated as the assessee's income from "Undisclosed Sources". The Departmental Representative filed Photostat copy of the said Balance Sheet and made the ITO's file available to us. We have perused the same. In the said Balance Sheet there were certain hand written remarks by the ITO who made the original assessment In the said Balance Sheet, on the assets side silver utensils and gold jewellery were shown at Rs. 42,287. Against the said item the ITO noted "covered by V. Dis." The assessee made the Voluntary Disclosure for an income of Rs. 81,000. It was shown as credit to the capital account on the liabilities side of the Balance Sheet. In the Balance Sheet it was shown as "Add:-Voluntary Disclosure Rs. 81,000." Against the said item the ITO noted in his handwriting that "Certificate under Section 8(2) is filed". From this, it is apparent that the assessee has disclosed the primary facts of her having silver utensils and gold jewellery of Rs. 42,387 in the Balance Sheet for the assessment year 1976-77. She has also filed the certificate issued to her by the Commissioner under Section 8(2) of the Voluntary Disclosure of Income and Wealth Ordinance Act, 1975 dated 31-12-77. Apparently, when the ITO made the Income-tax assessment on 5-8-78 he was satisfied. After completing the Income-tax assessment, the ITO commenced proceedings for Wealth-tax assessment on 21-3-81 by issuing notice under Section 16(2) of the Wealth-tax Act, 1957. The date of hearing was fixed to 27-3-81. On 27-3-81, the ITO found that the jewellery of Rs. 1,03,557 was not covered by the Certificate under Section 8(2) dated 31-12-77 on reconciliation of the Balance Sheet for the assessment year 1976-77 with the Certificate under Section 8(2) issued by the CIT. On this basis, he recorded reasons under Section 148 in the income-tax file on 27-3-81. In the reasons recorded it was mentioned by the ITO that "it is also revealed from the Certificate under Section 8(2) of Voluntary Disclosure of Income and Wealth Ordinance that only silver utensils worth Rs. 42,387 was disclosed by the assessee" and "as such, it appears that the assessee failed to disclose the jewellery before the department." From this, it is evident that the legal implications following from the facts disclosed in the Balance Sheet for the assessment year 1976-77 and the Certificate under Section 8(2) filed by the assessee in the Income-tax assessment proceedings of the assessee were not properly realised by the ITO at the time of making the original assessment though papers containing such information were in his possession. The details available to the ITO in the papers filed before him transmuted into an item of information in his possession only when its implications are recognised by the ITO. The ITO reconciled the implications only on 27-3-81 when he examined the Balance Sheet for the assessment year 1976-77 and the Certificate under Section 8(2) when he was engaged in the Wealth-tax assessment proceedings of the assessee for the assessment year 1976-77. Awareness of the correct implications has to be construed as "information" within the meaning of Section 147(b). Please see the case of United Mercantile Co. Ltd. v. CIT [1967] 64 ITR 218 (Ker.). In these circumstances, the re-opening of the assessment should be considered as reopening of the assessment under Section 147(b) only although the ITO styled the re-opening as under Section 147(a) in the re-assessment order dated 12-3-85. It was held by the Hon'ble Calcutta High Court that where a re-assessment proceeding was initiated under Section 147(a) and the appellate authority finds that the conditions of that clause are not present but those of Section 147(b) are obtained it can well treat the notice as one under Section 147(b)and support the re-assessment. Please see the case of Mriganka Mohan Sur v. CIT [1974] 95 ITR 503 (Cal.). In fact the awareness came to the ITO only on 27-3-81. This is apparent from the order sheet entry of the ITO in the Wealth-tax assessment file for the assessment year 1976-77 of the assessee. It reads as follows: "on reconciliation of the Balance Sheet for the assessment year 1976-77 with the Certificate under Section 8(2) of Voluntary Disclosure given by the CIT, West Bengal XII, it appears that the jewellery of Rs. 1,03,557 is not covered by the Certificate under Section 8(2) dated 31-12-77." In these facts and circumstances of the case, we uphold the reopening of the assessment as reopening under Section 147(b).
Since the ITO found the assessee to be the owner of gold and diamond jewellery in the previous year relevant to the assessment year 1976-77 and since the explanation offered by her was not found acceptable to the ITO, he correctly and justifiably invoked Section 69A. There is no error in the action of the I.T.O.
7. In the result, we uphold the order of the A.A.C. and dismiss the appeal filed by the assessee.