Reopening of assessment under Section 147 of the I. T. Act, 1961 - Conditions to be satisfied - Clause (a) and (b) - Interpretation and application.

( 1 ) THE subject-matter of challenge in this application under Article 226 of the Constitution is a notice dated 4th January, 1974, issued under Section 148 of the I. T. Act, 1961, for the assessment year 1969-70. It appears that the original assessment was completed some time in February, 1972. Prior to the completion of the original assessment, the assessee had written on 15th November, 1971, a letter in which the assessee had stated that in respect of premises at Sarat Bose Road, a suit against the tenant for vacating the premises in question had been filed and, as such, no rent had been accepted by the assessee since November, 1967. The assessee wrote this letter for the reason that no income was shown under the head " Income from property " in the return of the income for the assessment year 1969-70, though for the assessment year 1968-69 a part of it had been shown. According to the assessee, in the particulars of income with the statement annexed for the relevant year, the assessee had indicated the premises in question and along with that letter it stated the assessee had informed the ITO that there was a dispute with the tenant in respect of the premises in question and, as such, no rent was being realised. The position, therefore, seems to be that the assessee was informing the ITO prior; to the assessment that the assessee was the owner of the premises in question and that the said premises had been let out to certain tenants who were due to pay rent at'rs. 100 per month but the same had not been accepted by the assessee because there was dispute with the tenants and the landlord had filed a suit and the tenants had been depositing rent with the Rent Controller. These facts, in my opinion, were brought to the notice of the IIP if the version of the assessee in this application has to be accepted, both by the letter written on behalf of the assessee as well as by the personal interview which the assessee's accountant had with the ITO at the time of assessment. The accountant, who alleges to be the accountant, present at the time of the assessment and whose name appears in the assessment order has affirmed an affidavit to this effect. This position has not been controverted by any affidavit by the ITO who had made the original assessment nor by any affidavit of any one who was competent to advert to these facts. The ITO who has issued the impugned notice has also not made any affidavit. But the recorded reasons of the ITO for reopening the assessment in question were produced before me. The said reasons are as follows :"rent received @ Rs. 100 per month from 40, Sarat Bose Road, Calcutta, was not shown in the return. The rent was deposited by the tenant to the Controller of

Rent. The assessee has filed a suit of ejectment against the tenant and as such it did not include the rent paid by the tenant. As per Section 23 (1) the property income is to be considered on deemed basis and as the company follows the mercantile system of accounting, it has escaped assessment. Hence issue notice under Section 148 to the assessee. "

( 2 ) ON behalf of the revenue it was contended that under Section 23 of the I. T. Act, 1961, the fact whether rent was being realised from the tenant or not was irrelevant because the rent income was to be assessed on deemed basis and that is the position of law. Counsel for the revenue drew my attention to the observations of this court in the case of Sri Sri Iswar Radha Govinda Jew v. CIT. As, at this stage, I am not concerned with the validity of this position, I will assume that income of the property which is to be assessed on the deemed basis has escaped assessment.

( 3 ) NEXT question, however, is whether such income, assuming that the same has escaped assessment, was due to the omission or failure of the assessee to disclose either truly or fully the material facts relevant for the assessment. It is for the ITO to draw the necessary inference from the facts indicated