2011 (11) TMI 106 - HC - Income Tax

Income escaping Assessment u/s 147/148 - Attachment of computation of income with the return - claim of exemption u/s 54EC in the computation - Held that - In both the sets of computation there was a complete silence in regard to the dates on which the amounts were invested. The assessment order does not deal with this aspect. In the circumstances having applied the touch stone of the legal principles underlying the reopening of an assessment beyond a period of four years we have come to the conclusion that there was no full and proper disclosure by the assessee of all the material facts necessary for the assessment. - A true disclosure is a disclosure which is truthful in all respects. - As the assessee failed to do so the Revenue in the present case would be justified in reopening the assessment on the ground that income has escaped assessment. - Decided against the assessee.

Issues Involved:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Compliance with the obligation to disclose primary facts by the Petitioner.
3. Justification for reopening the assessment beyond four years.
4. Application of Explanation 1 to Section 147.
5. The necessity of full and true disclosure of material facts by the assessee.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued Under Section 148:

The Petitioner questioned the legality of the notice issued on 29 March 2011 under Section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the Assessment Year 2004-05. The notice was issued after an audit query indicated that the Petitioner had not invested the capital gains in specified bonds within the stipulated period, thus making the claim under Section 54EC irregular. The court examined whether the notice was valid, considering the statutory requirements and the timeline involved.

2. Compliance with the Obligation to Disclose Primary Facts by the Petitioner:

The Petitioner argued that they had complied with the obligation to disclose primary facts, including the agreement under which the capital asset was transferred, the cost of acquisition, and the investments made in specified securities. The Petitioner contended that the Assessing Officer had raised queries during the original assessment, to which the Petitioner had duly responded, thus fulfilling the duty of disclosure.

3. Justification for Reopening the Assessment Beyond Four Years:

The reopening of the assessment was beyond four years from the end of the relevant Assessment Year. According to the first proviso to Section 147, such action is justified only if there was a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. The court scrutinized whether the Petitioner had indeed failed in this duty, thereby justifying the reopening of the assessment.

4. Application of Explanation 1 to Section 147:

Explanation 1 to Section 147 states that the mere production of account books or other evidence from which material evidence could be discovered by the Assessing Officer does not necessarily amount to a disclosure. The court noted that the obligation to disclose primary facts lies with the assessee, and the burden does not shift to the Assessing Officer. The court referred to previous judgments to emphasize that an assessee cannot simply produce voluminous records and expect the Assessing Officer to uncover all material facts without explicit disclosure.

5. The Necessity of Full and True Disclosure of Material Facts by the Assessee:

The court highlighted that full and true disclosure means providing all material facts without any hidden or suppressed information. In the present case, the Petitioner did not disclose the dates on which the investments in specified bonds were made, either in the original return or in the response to the Assessing Officer's queries. This omission was crucial as it directly impacted the eligibility for exemption under Section 54EC. The court concluded that there was no full and proper disclosure by the Petitioner, which justified the reopening of the assessment.

Conclusion:

The court dismissed the Petition, concluding that the Petitioner had failed to make a full and true disclosure of all material facts necessary for the assessment. Consequently, the reopening of the assessment by the Assessing Officer was justified. The court did not find any reason to exercise its extraordinary jurisdiction under Article 226 of the Constitution.

← Previous Next →