Law:

Section:

Section 147(b) of the income-tax act, 1961-Reassessment-Information-Both Income-tax and Wealth-tax, original assessments completed accepting cost of construction of house property shown, even though it was allegedly much higher-Matter subsequently referred under the Wealth-tax Act to government valuer who reported a much higher value-Whether ITO justified in reopening assessment to tax undisclosed investment-Held, on facts, no Facts The assessee started construction of a building on 1-2-1969 and completed its construction on 30-3-1971. She showed its value at Rs. 2,99,836. There was a complaint that the total cost of construction was Rs. 15 lakhs. However, the ITO completed both income-tax and wealth-tax assessments for the assessment years 1970-71 and 1971-72 in September 1972 accepting the cost of construction shown. Subsequently, under reference by the ITO in August 1974, the Government valuer determined the estimated cost of construction which was found to be much in excess of the cost declared and accepted in the assessment. The ITO, therefore, initiated proceedings under section 148, read with section 147(b), for taxing the unexplained investment. During these reassessment proceedings, the cost of construction was sought to be evaluated again through the Government valuation cell. Since the assessee did not permit the Government valuer to inspect the building, the ITO estimated the cost of construction at R's. 6,20,000 and brought to tax the unexplained investment as assessee's income in the above two years. The AAC upheld the reopeping of assessment but remanded the case for fresh order after getting the report of the Government valuer. The Tribunal found (i) that the complaint regarding under-statement of cost was on record even at the time of original assessment and it did not contain any material which could give rise to the ITO's reasonable belief for supersession of the actual cost of construction; (ii) that the ITO merely embarked upon a fishing inquiry and chose to refer, under the Wealth-tax Act, to the valuation cell although no Wealth-tax proceedings were pending for the assessment year so that the ITO had no authority to make such reference;…

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