Ramanujam, J.:— The assessee in this case is an individual and the original assessment for the year 1965-66 was completed on October 8, 1965, computing the total income as Rs. 8,990, the source of income being property and business in coconuts. Later, the ITO reopened the assessment under s. 147(a) of the I.T Act, 1961 (hereinafter referred to as “the Act”), determining the total income at Rs. 75,050. In doing so, he held that the assessee had not disclosed the true cost of construction of the two properties, viz., No. 26, Subbaraya Mudali Street, and No. 41, Ban-garu Naicken Street, Madras-5, which amounted to Rs. 87,300 as against the cost of construction of Rs. 21,235 disclosed by the assessee. Therefore, the difference of Rs. 66,055 in the cost of construction was added to the income originally determined.

2. The assessee appealed to the AAC both against the reopening of the assessment as well as on the quantum. The AAC confirmed the quantum of cost of construction but did not give a finding on the validity of the reopening of the assessment. The assessee thereafter appealed to the Income-tax Appellate Tribunal questioning the validity of the reopening of the assessment. In view of the fact that the AAC has not given any finding on that question, the Tribunal remitted the matter back to the AAC to give a finding on that issue. The AAC submitted a remand report dated March 15, 1976, and his finding was that on the state of the records, he was unable to give a finding either way. The Tribunal thereafter heard the appeal and held that the ITO was justified in reopening the assessment and that the order of reassessment is also correct on merits. Aggrieved by the view taken by the Tribunal on the question of validity of the reopening of the assessment, the assessee has sought and obtained a reference on the following question:

“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that all the materials necessary for the assessment have not been furnished by the appellant and the reopening of the assessment under section 147(a) of the Act was, therefore, valid?”

3. Before we proceed to answer the above question, it should be noted that the assessee has not challenged the order of the Tribunal in so far as it sustained the quantum of income as determined in the reassessment order and only the initiation of proceedings under s. 147(a) by the ITO has been challenged.

4. The facts which have been established in this case and which are not in dispute are these: The assessee purchased the two house properties referred to above for a total cost of Rs. 42,643. The properties are adjacent to one another. In the balance-sheet for the accounting year relating to the assessment year 1965-66, the value of the buildings was shown as Rs. 63,778. The assessee claimed that the difference amounting to Rs. 21,235 represented improvements made subsequent to the purchase. At the stage of the original assessment, when the ITO after noticing this difference called upon the assessee to explain, the assessee explained as to how this difference had occurred by his letter dated September 26, 1965. Subsequently, the assessee, in connection with the-wealth-tax assessment for the subsequent year 1969-70, filed an estimate of the buildings as given by the valuer at Rs. 1,30,158. This estimate was taken as the basis for further enquiry regarding the value of the two buildings. There was a spot inspection and local enquiries which revealed that the buildings purchased were demolished and new constructions had been put up. Since the sum of Rs. 21,235 which was claimed as the amount spent for construction was found to be far below the value adopted by the valuer, the case was referred to the Executive Engineer, Valuation Cell. He found that the total plinth area constructed was 6,191 sq. ft., both ground floor and first floor, and that the cost of improvements to the two buildings will work out to Rs. 87,300 as against the cost at Rs. 21,235 adopted by the assessee. In adopting the said value, the valuer has also given credit for the assessee's claim for having used the dismantled materials from the existing structure. The value adopted by the valuation cell was put to the assessee and his objections were called for as to why the difference between Rs. 87,300 and Rs. 21,235 should not be taken as the unexplained investments in the properties. In response thereto, the assessee had produced a 80 pages exercise notebook showing some details of expenses towards the cost of construction. On perusing the note-book (it was found that it) has been prepared for the occasion that it was not written as and when the transactions took place and that, therefore, unless the relevant vouchers and other materials in support of the expenses claimed in the note-book are produced, the note-book by itself cannot be taken as authentic. According to the approved plan of the building, the assessee is found to have got permits for 14½ tons of cement on December 22, 1964, and for 14½ tons of cement on September 18, 1964. The purchase of cement to the tune of 29 tons has not been shown in the books produced by the assessee to prove the cost of construction. When this was pointed out, the assessee had no explanation to offer. The ITO, therefore, took the difference between Rs. 87,300 and Rs. 21,235 as unexplained investment in the properties by the assessee.

5. Thus, on the materials set out above, it is seen that subsequent to the original assessment there was investigation, and that investigation revealed that the assessee has undertaken reconstruction of both the buildings at a cost of Rs. 87,300 and that he has not effected mere repairs or improvements for Rs. 21,235 as contended by him.

6. The contention of the learned counsel for the assessee is that since all the materials relevant for the completion of the assessment had been produced even at the stage of the original assessment, the escapement of income cannot be taken to have arisen from non-disclosure of material facts by the assessee and, therefore, s. 147(a) cannot be invoked in this case. It is pointed out by the learned counsel for the assessee that at the time of the original assessment, in support of the assessee's case that he has spent only a sum of Rs. 21,235 for reconstruction of the two buildings, he had produced the necessary details in his letter dated September 26, 1965, and that, therefore, the assessee is not guilty of any non-disclosure of any relevant material for completion of the assessment and if the ITO did not probe further into the matter to find out whether the assessee's statement as to the amounts spent for making the improvements is correct or not, the assessee cannot be taken to be guilty of non-disclosure of true and correct particulars. At the time of the original assessment, the assessee had claimed that Rs. 21,235 has been spent towards cost of improvements to the two houses, and the assessee is said to have filed a letter giving details of the expenditure incurred by him. The ITO appears to have accepted the claim made by the assessee without probing into the matter further. It is only when the assessee himself filed a valuation report by a valuer in the wealth-tax proceedings for the year 1969-70, showing the value of the two houses at Rs. 1,30,158, that the ITO felt that the matter requires further probe. It is only when the ITO caused a spot inspection to be made, it was revealed that both the houses have a plinth area of 6,191 sq.ft The cost of such reconstruction as determined by the Executive Engineer of the Valuation Cell of the Department was Rs. 87,300. The materials gathered subsequent to the assessment by the ITO indicate that the assessee has not disclosed the materials fully and truly. This will clearly attract s. 147(a) of the Act. The learned counsel for the assessee would further point out that unless there is an overt act by the assessee which amounts to concealment of income, it is not possible for the ITO to invoke his powers under s. 147(a). Since the assessee has not furnished fully and truly all the requisite materials, it is not possible for us to agree with the said contention of the assessee. Merely because the assessee has furnished at the time of the original assessment the account books and other materials, the power of the ITO to invoke s, 147(a), if he finds that the materials furnished are not complete or true, is not taken away. That section clearly contemplates the reopening of the assessment when the assessee has failed to disclose fully and truly all material facts bearing on the assessment. Here, though the assessee has returned the cost of the improvements made to the building and other details, those materials-which were straightaway accepted by the ITO have been found to be not true. Therefore, the assessee cannot be taken to have disclosed the materials fully and truly, and this would attract s. 147(a).

7. In Kantamani Venkata Narayana & Sons v. 1st AMI. ITO [1967] 63 ITR 638, the Supreme Court, while dealing with the scope of s. 34 of the 1922 Act (corresponding to s. 147 of the 1961 Act) had observed that the assessee does not discharge his duty to disclose fully and truly material facts necessary for the assessment of the relevant year by merely producing the books of account or other evidence, that he has to bring to the notice of the ITO particular items in the books of account or portions of documents which are relevant and that even if it is assumed that, from the books produced the ITO if he had been circumspect, could have found out the truth, he is not on jthat account precluded from exercising the power to assess income which had escaped assessment. In that case, after the original assessment, it was discovered that there has been considerable increase in the investments in the money-lending transactions of the assessee and also in its wealth and the increase in wealth was wholly disproportionate to the known sources of income of the assessee and no attempt was made by the assessee to furnish reasonable proof of the source of the additional wealth. On those materials, the Supreme Court held that the ITO had prima facie reason to believe that the assessee had omitted to disclose fully and truly all material facts and that in consequence of such nondisclosure, income had escaped assessment and, therefore, he has jurisdiction to initiate proceedings under s. 34(1)(a) of the 1922 Act. In that case, the Supreme Court reiterated two of its earlier decisions in Calcutta Discount Company Ltd. v. ITO [1961] 41 ITR 191, and Narayanappa v. CIT [1967] 63 ITR 219. In those cases the Supreme Court had held that for invoking s. 34(1)(a) of the 1922 Act, two conditions precedent must co-exist, that the ITO must have reason to believe (i) that income, profits or gains had been underassessed, and (ii) that such underassessment was due to nondisclosure of material facts by the assessee, that whether those grounds are adequate or not is not a matter for the court to investigate, that the sufficiency of the grounds which induced the ITO to act is not a justiciable issue, that though the existence of the belief can be challenged by the assessee, the sufficiency of the reasons for the belief cannot be challenged, that the expression “reason to believe” in s. 34 of the 1922 Act means, a purely subjective satisfaction on the part of the ITO and that even if he could have found out the truth at the stage of the original assessment if he had been circumspect, the ITO may not on that account be precluded from exercising the power to assess income which had escaped assessment. In P.S.S Bommanna Chettiar v. Commissioner Of Income-Tax, Madras [1969] 73 ITR 26, a Division Bench of this court had expressed the view that an assessee cannot object to reopening of the assessment merely on the ground that all the account books were before the original authority and a little more circumspection on his part would have brought to light the so-called primary facts latterly discovered by the reopening authorities, relying on the decision of the Supreme Court in Kantamani Venkata Narayana & Sons v. 1st Addl. ITO [1967] 63 ITR 638, referred to above.

8. The learned counsel for the assessee refers to the decision of a Division Beneh of the Madhya Pradesh High Court in Lokendra Singh v. ITO [1981] 128 ITR 450 dealing with the scope of s. 147(a) of the 1961 Act wherein the court has expressed that when the primary facts were already before the ITO and after some routine enquiry, the ITO could have assessed the income on the basis of such information, it is not open to him to invoke the provisions of s. 147(a) and reopen the assessment even though he may have omitted to notice the facts mentioned in the return by oversight. In that case, agricultural lands belonging to the assessee were acquired by the Government and possession of the lands was taken over on April 2, 1967. A sum of Rs. 1,28,400 was fixed as the market value of the lands acquired. On a reference under s. 18 of the Land Acquisition Act, the District Court enhanced the compensation to Rs. 17,04,038. The State challenged the order of the District Court by filing an appeal before the High Court. The High Court reduced the amount of compensation to Rs. 12,78,238. During the pendency of the litigation, the assessee did not receive any interest from the Government. For the assessment years 1969-70 to 1972-73, the ITO completed the assessments. Thereafter, the assessments were sought to be reopened on the ground that income had escaped assessment as a result of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. The reopening was challenged on the ground that since the assessee is maintaining the accounts on cash basis, the interest on the amount of compensation which had not been actually, paid cannot be included in his income for the assessment years 1969-70 to 1972-73. that the fact that the income was not paid and, therefore, it has not been included in the return has been specified in the return itself and, therefore, the assessee is not guilty of any non-disclosure of any materials fully or truly necessary for the assessment. Thus, the decision of the court that there has been no non-disclosure of full and true facts at the stage of the original assessment and, therefore, s. 147(a) could not be invoked is based on the special facts of that case, and that decision cannot be taken to assist the assessee in this case who has been found not to have disclosed fully and truly all material facts necessary for the assessment. The assessee also relies on the decision in Sugar Selling Agency P. Ltd. v. Kannan, ITO [1981] 130 ITR 801 of the Bombay High Court. That was a case where the original assessment made on a sole selling agent was sought to be reopened by invoking the power under s. 147(a) on the ground that the assessee has failed to return the commission receipts. That was questioned before the court on the ground that though the agency agreement provided for a commission being paid, ss. 361 and 363 of the Companies Act, 1956, prohibits the payment of such commission if the agent is an associate of a managing agency, that even if commission had been paid, it has to be refunded to the company. In view of the statutory prohibition against payment of commission, the sole selling agent in that case was held not entitled to any commission and, therefore, income has not escaped assessment so as to enable the ITO to invoke s. 147(a). This decision also does not help the assessee.

9. In a recent decision of the Bombay High Court in Dr. Keki Hormusji Gharda v. B.H Raisinghani*, WTO [1982] 135 ITR 386, a case more or less similar to the one before us came up for consideration. In that case, an assessee had valued his property for the assessment year 1976-77 at Rs. 1,17,793. For the subsequent assessment year 1977-78, the assessee himself filed a valuation report showing the valuation of the property as on March 31, 1977, at Rs. 5,05,000, The assessee, soon thereafter, sold the property for the almost equivalent value of Rs. 5,00,000. Having regard to the difference in the assessee's own valuation in 1976-77, the WTO issued a notice to reopen the assessment for the assessment year 1976-77 under s. 17 of the W.T Act, 1957, on the ground that he had reason to believe that the net wealth of the assessee chargeable to tax had escaped assessment. When that was challenged before the court on the ground that the valuation given by the assessee having been accepted in 1976-77, it will be a mere change of opinion on the part of the WTO and on the basis of that mere change of opinion s. 17 cannot be invoked, the court pointed out that it was not a mere change of opinion on the part of the WTO but cogent materials, viz., the valuation report obtained by the assessee and the sale also effected by him, coming to the notice of the WTO on the basis whereof he had within the meaning of s. 17(1) information and reason to believe that net wealth chargeable to tax had escaped assessment and, therefore, he was justified in invoking s. 17. The decision in that case clearly applies to the facts of this case.

10. In the light of the above discussion, we answer the question in the affirmative and against the assessee. The assessee will pay the costs of the Revenue. Counsel's fee Rs. 500.