- (1.) In both the Income Tax References, the Income Tax Appellate Tribunal, Delhi, (hereinafter referred to as "the Tribunal") has referred the following two identical questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court: 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the pendency of proceedings for enhancement of compensation for acquisition of land was not a material fact that was required to be disclosed by the assessee in the assessment proceedings and, therefore, the reopening of assessments under Section 147(a) of the Income Tax Act, 1961 for non-disclosure of the aforesaid fact was invalid
(2.) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the order of the U.P. Avas Evam Vikas Parishad Tribunal was not one of the nature described in Section 153(3)(ii) and, therefore, the said section did not enlarge the limitation either for the reopening of the assessments or for their completion 2. In Income Tax Reference No. 166 of 1989, a common reference has been made against six assessees for different assessment years. In respect of Smt. Munia Devi Jain, the assessment years involved are 1973-74, 1977-78 to 1980-81; in respect of Rajinder Chand Jain, Kishan Chand Jain and Inder Chand Jain, the assessment year is 1980-81 whereas in respect of Narain Das Jain deceased through legal heir Inder Chand Jain the assessment years are 1973-74 to 1976-77. In Income Tax Reference No. 254 of 1991 a common reference has been made against five assessee for various assessment years. In respect of Smt. Munia Devi Jain, the assessment year is 1976-77 whereas in respect of Kishan Chand Jain, Rakesh Kumar Jain, Rajender Chand Jain and Inder Chand Jain, the assessment years are 1976-77 to 1979-80.
(3.) Briefly stated, the facts giving rise to the present references are as follows: Assessment in all the aforesaid cases had earlier been made under Section 143(3) of the Act on various dates. The assessees owned certain land which had been acquired and compensation had already been awarded by the Collector. When the assessment for the years in question was made, proceedings for enhancement of compensation at the instance of the assessees were pending before the U.P. Avas Evam Vikas Parishad Tribunal (hereinafter referred to as "the Avas Tribunal"). The Tribunal, vide award dated 25.5.1981, enhanced the compensation to be given to the assessees arid also awarded interest on enhanced compensation. Under the award, the assessees became entitled to varying amount of interest for the period relating to various previous years relevant to the assessment years in question. The Income Tax Officer initiated proceedings under Section 147(a) of the Act and issued notices under Section 148 of the Act for all the years in question. In pursuance of the notices under Section 148 of the Act, the assessees filed returns of income declaring their income at the same amount at which their income had been determined in the assessment made under Section 143(3). The assessees claimed that action under Section 147/148 could not be legally taken but this objection was overruled by the Income Tax Officer. The assessees appealed before the Appellate Assistant Commissioner, Agra but failed. The assessees went up in appeal before the Tribunal. The assessees contended that under Section 147(a) of the Act action could not be taken against them because there was no failure on their part to disclose fully and truly all material facts necessary for their assessments. On the other hand, the Revenue contended that the pendency of the proceedings before the Avas Tribunal for enhancement of compensation was a material fact which the assessees should have disclosed during the assessment proceedings before the Income Tax Officer and which they admittedly failed to disclose. According to the assessees, this was not a material fact which was required to be disclosed by the assessees. The Tribunal agreed with the contentions of the assessees and held that pendency of proceedings for enhancement of compensation was not a material fact that was required to be disclosed by the assessees and, therefore, the action taken under Section 147(a) of the Act was invalid. The Tribunal, in paragraphs 7 and 8 of its order, has recorded the following findings: 7. As is evident from the facts narrated above, assessments for all the years under appeal had initially been completed under Section 143. Reopening of assessments under Sub-clause (a) of Section 147 is permissible in a case where the assessee did not file a return or the assessee failed to disclose fully and truly all material facts necessary for his assessment. Action for reassessments under Sub-clause (b) of Section 147 is permissible where there has been no omission or failure, as mentioned in Clause (a) on the part of the assessee but the Income Tax Officer has, in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment for any assessment year. In the case before us, the material fact that is said to have been suppressed by the assessee is that it had moved the U.P. Awas Evam Vikas Parishad Tribunal for enhancement of compensation. The award by the said Tribunal had been made on 25.5.1981 while the assessment for the assessment year 1981-82 was made more than six months after, i.e., on the 30th November, 1981. therefore, so far as assessment year 1981-82 is concerned, the assessee had become entitled to a certain amount of interest which was taxable as its income for that year and patently till the assessment was Completed the assessee did not inform the Income Tax Officer of the coming into existence of income. Therefore, so far as assessment year 1981-82 is concerned, there is a clear default on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year and action under Section 147(a) for this year was legally permissible and was, in our view, validly taken. 8. As regards the other assessment years, we have to see whether the pendency of the proceedings for enhancement of compensation was a material fact that the assessee should have disclosed during the assessment proceedings. So far as the amount of interest relevant to assessment years under consideration is concerned, patently the award had not been made till the assessments were originally made and it was impossible for the assessee to disclose the amount of interest. In Rai Singh Deb Singh Bisht v. Union of India the Hon'ble High Court of Delhi held that facts that come into existence subsequent to original assessment cannot possibly be disclosed and, therefore, a fact which comes into existence subsequent to the making of assessment cannot be a material fact within the purview of Section 34(1)(a) of the 1922 Act (equivalent to Section 147(a) of the 1961 Act). In T.M. Kousali v. 6th Income Tax Officer Hon'ble the Karnataka High Court held that proceedings cannot be initiated under Section 147(a) to assess amounts awarded as enhanced compensation after the assessments had already been made. That was a case in which like the case before us, the amount of interest arising from the compensation awarded was sought to be taxed in the reassessments. In Mukhtiar Singh Sandhu v. ITO (1985) 160 ITR 521 the Hon'ble Punjab and Haryana High Court also dealt with a similar controversy and held that there was no failure to disclose fully and truly all material facts. In this case also when the assessee filed his returns, his application under Section 18 of the Land Acquisition Act was pending with the District Judge and the assessee during the assessment proceedings had not mentioned anything with regard to the pendency of the application under Section 18 of the Land Acquisition Act. In Ganesh Chander Khan v. ITO Hon'ble the Calcutta High Court held that where in respect of house occupied by the government and later requisitioned, compensation for house for the previous years was fixed by agreement and the assessee was till the assessments were made not aware of compensation becoming payable, the assessments could not be reopened under Section 147/148. Thus, in the case before us so far as the amount of interest is concerned, the assessee could not have disclosed the same in the proceedings for assessments years 1973-74 and 1977-78 to 1980-81 and consequently she cannot be accused of any failure on her part. So far as the pendency of the proceedings for enhancement of compensation are concerned, in the case of T.M. Kousali (supra) the Hon'ble Karnataka High Court has specifically held that the pendency of the proceedings was not a material fact that was required to be disclosed during the assessment proceedings. The same is the view taken by Hon'ble the Punjab and Haryana High Court in the case of Mukhtiar Singh Sandhu (supra) in which the case of T.M. Kousali (supra) has been referred to. The learned Departmental Representative did not cite any authority to the contrary nor did he point out how the mere fact of pendency of proceedings could have changed the quantum of income assessed in the original assessments so that it could be said that it was a material fact for the assessment of income for those years. We, therefore, hold that for assessment years 1973-74 and 1977-78 to 1980-81 there was no failure on the part of the assessee to disclose all material facts necessary for her assessment for those years within the meaning of Section 147(a) and consequently we hold that action for reassessments for those years under Section 147(a) was invalid.;