Judgment:
ORDER
A. R. TIWARI, J. :
On the direction of this Court passed on 2nd August, 1988 in Misc. Civil Case No. 174 of 1985 on application of the assessee presented under s. 256(2) of the IT Act, 1961 (for short the Act), the Tribunal has stated the case and referred the undernoted questions of law arising out of the order dt. 26th October, 1984 passed by the Tribunal in ITA No. 10/Ind/1983 for asst. yr. 1975-76 :
'(i) Whether, on the facts and in the circumstances of the case, the ITO had jurisdiction to reopen the assessment under s. 147(a) of the IT Act, 1961
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee, being HUF, could not receive gifts ?'
2. Facts lie in a narrow compass. For the asst. yr. 1975-76, (previous year ending Diwali, 1974) the assessee was originally assessed in the status of HUF under s. 143(3) of the Act on total income of Rs. 36,400 and agricultural income of Rs. 4,210. In wealth tax proceedings, the matter was examined by the appropriate authority and it was noticed that total wealth as on the valuation date had increased by Rs. 87,000. This formed the basis of the ITOs satisfaction that certain income had escaped assessment. He, therefore, documented the reasons and reopened the assessment for the asst. yr. 1975-76 under s. 147(a) of the Act. The assessee was noticed and then filed the revised return showing the agricultural income as Rs. 25,000, non-agricultural income Rs. 32,000 and gifts of Rs. 30,000. The ITO partly believed the assessee to the extent of Rs. 26,210 and held that the balance of Rs. 60,790 was unexplained accretion. He, thus, made the addition of Rs. 60,790 to the income of the assessee. He doubted the assertion as regards the receipts from the gift (Annexure-A). The assessee then filed the appeal before the AAC. In this appeal no ground was taken as to the validity of initiation of proceedings under s. 147(a) of the Act (Annexure B). The AAC concurred with the ITO and dismissed the appeal (Annexure C). The assessee then filed the appeal before the Tribunal. The order of the Tribunal does not contain any discussion about the proceedings under s. 147(a) of the Act. No Misc. Application under s. 254(2) of the Act was filed for any rectification. The appeal was dismissed. The assessee then filed the application under s. 256(1) of the Act in which no question regarding the initiation of proceedings under s. 147(a) was proposed. The application was rejected. The assessee then filed the application under s. 256(2) of the Act which was registered in this Court as Misc. Civil Case No. 174 of 1985. That was disposed of on 2nd August, 1988 directing the Tribunal to state the case and refer the aforesaid questions for consideration. In compliance, the Tribunal has referred the aforesaid questions.
3. We have heard Shri P.M. Choudhary, learned counsel for the applicant/assessee and Shri A. M. Mathur, learned Sr. counsel with Shri A. K. Shrivastava, for the non-applicant/revenue.
4. As regards question No. (i), the counsel for the applicant conceded that no such question was proposed under s. 256(1) of the Act before the Tribunal. He, however, submitted that question did arise from the order of the Tribunal and as it went to the root of the matter, this Court by previous order directed the Tribunal to refer the question. The counsel has placed reliance on CIT vs . Scindia Steam Navigation Co. Ltd. : [1961]42ITR589(SC) Om Prakash vs . Addl. CIT : [1979]119ITR251(MP) and Dunlop Rubber Company Ltd. vs . ITO & Ors. : [1971]79ITR349(Cal) .
5. As the question is referred on direction from this Court, we do not consider it proper or necessary as to whether the question is entertainable despite the fact that such a question was not proposed in application under s. 256(1) of the Act and the Tribunal had no occasion to consider this question as it does not seem to have been pressed before it.
6. In ITO & Ors. vs. Biju Patnaik AIR 1991 SC 464 it is held as under :
'Sec. 147(a) postulates two conditions, namely, that the ITO must, on the basis of material facts on record, prima facie to be satisfied that the income of the assessee is exigible to tax for the relevant assessment year and that he had reason to believe that it had escaped assessment. He must have reason to believe that the escapement of income was on account of the omission or failure on the part of the assessee to fully and truly disclose all the material facts necessary for the assessment. Both the conditions are conditions precedent to the exercise of the jurisdiction under s. 147(a) r/w s. 148. The assessee stated before making assessment, that the income was received before 31st March, 1956 financial year ending, by which date s. 12B of the IT Act, 1922 making capital gains exigible to tax had not come into force. Accepting the sum in question was excluded from the consideration of the assessment. The subsequent information in possession of the ITO disclosed that the assets were transferred on a date by which date s. 12-B came into force. The notice did not prima facie disclose the satisfaction of the two conditions precedent enjoined under s. 147(a), but in the counter-affidavit filed by the ITO in the High Court he stated all the material facts. The proceedings drawn also showed that the ITO had applied his mind to the facts on record and was prima facie satisfied that reopening of the assessment for the assessment year in question was needed due to those stated facts'.
7. It is, thus, clear that s. 147(a) postulates two conditions, as noted above. It is clear from the record that the assessee was originally assessed under s. 143(3) of the Act on total income of Rs. 36,400 and agricultural income of Rs. 4,200. The appropriate authority later discovered that the wealth had increased by Rs. 87,000. He, therefore, formed the opinion that the income had escaped assessment. The aforesaid figures furnished the material to form the basis for re-opening of the assessment. In our view, the twin conditions, as noted above, were fulfilled in this case justifying recourse to and reopening of the assessment under s. 147(a) of the Act. In view of this position, we are satisfied that the ITO had jurisdiction to reopen the assessment.
8. As regards Question No. (ii), we find that the Tribunal was not right in holding that the assessee, being HUF, could not receive the gifts. It is a matter of fact whether gifts as such were received or not. The counsel for the applicant has placed reliance on Pushpa Devi vs . CIT : [1977]109ITR730(SC) It appears from the statement of the case that the aforesaid question was decided adverse to the assessee on the ground that the assessee did not name persons who have made such gifts. The counsel submits that this conclusion was perverse in that the names and particulars were available in Annexure F.
9. In view of the conflict with Annexure F, we find that the Tribunal was required to examine the genuineness of the contention as regards gifts rather than sliding under the umbrella that HUF could not receive the gifts at all.
10. In view of the aforesaid position, we answer the questions as under :
(a) Question No. (i) is answered in the affirmative i.e. in favour of the Revenue and against the assessee.
(b) Question No. (ii) is answered in the negative i.e. in favour of the assessee and against the Revenue but with direction that the Tribunal shall hear both the sides and decide as point of fact whether the gifts as such as alleged were received by the assessee or not and proceed further on conclusion in this regard after considering the particulars as available in Annexure F.
11. We answer the questions, as noted above, and dispose of this Misc. Civil Case but with no orders as to costs. Counsel fee is, however, fixed at Rs. 750 for each side, if certified.