1986 (3) TMI 342 - SC - Income Tax

Summary

Issues Involved:
The judgment involves the application made u/s 256(2) of the Income-tax Act, 1961 for two questions to be referred to the High Court regarding the validity of reassessment proceedings u/s 147(a) and the justification of the Tribunal's action u/s 147(a) for certain assessment years.

Reassessment Proceedings u/s 147(a):
The key issue revolves around the obligation of the assessee to disclose fully and truly all material facts necessary for assessment, as per the Calcutta Discount Co. Ltd. v. ITO case. The belief of the ITO was based on the discrepancy in depreciation claimed on assets, where masonry works were claimed but the assets were primarily earthwork. The crux was whether the nature of assets was fully and truly disclosed by the assessee.

Disclosure of Material Facts:
The dispute centered on the valuation report and discussions between the assessee and the assessing authority regarding the nature of assets. The contention was whether the assessee adequately disclosed the primary facts, especially the composition of assets in terms of masonry and earthwork, which was crucial for determining depreciation allowance.

Failure to Disclose Material Facts:
The judgment emphasized that the assessee's failure to disclose the proportion of earthwork and masonry work in assets was a material fact for calculating depreciation. The ITO's belief of income escapement due to over-depreciation on the assumption of full masonry work was considered reasonable, as per established legal principles.

Legal Principles and Authorities:
The Explanation 2 to section 147 of the Act clarified the importance of full and true disclosure by the assessee. The judgment referenced precedents like Hazi Amir Mohd. Mir Ahmed v. CIT and ITO v. Lakhmani Mewal Das to highlight the duty of the assessee to disclose all relevant material facts, even if not explicitly requested by the assessing authority.

Decision and Conclusion:
The High Court's decision to decline calling for a statement of case on a question of law was upheld, indicating that the appeals failed. The judgment reiterated the significance of disclosing all material facts for assessment purposes, emphasizing that the omission to disclose such facts could lead to the reopening of assessments u/s 147(a).