TMI Blog2011 (11) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... iwala, Satish Shri R. Mody and Ms. Aasifa Khan for the Petitioner. Shri B.M. Chatterjee for the Respondent. JUDGMENT Dr. D.Y. Chandrachud, J. - The Petitioner seeks to question the legality of a notice issued on 29 March 2011 under Section 148 of the Income Tax Act 1961 by which the assessment for Assessment Year 2004-05 is sought to be reopened. On 31 July 2001 the Petitioner entered into an MOU with a third party, Dosti Associates for the transfer of development rights in certain land for a consideration of Rs. 39 Crores. Following this a development agreement was entered into on 31 October 2001. Finally, a supplemental agreement was entered into on 15 December 2003 by which in consideration of the total agreed sum of Rs. 39 Crores paid by the developer to the Petitioner, the Petitioner recognized the acquisition by the developer of the absolute right to develop the property. Clause 5 of the agreement stipulated that with effect from 15 December 2003 the developer had been placed in absolute and complete possession of the property. 2. The Petitioner filed a return of income for Assessment Year 2004-05. In the computation of assessable income profits on the sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The audit query was to the effect that a scrutiny of the bonds in which monies were invested by the Petitioner revealed that only an amount of Rs. 6.80 Crores was eligible for exemption under Section 54EC as it has been invested within six months from the date of the sale deed. The remaining amounts had in fact been invested between 1 February 2002 to 30 June 2002 prior to the date of transfer (15 December 2003). Those investments which were made between 17 to 22 months prior to the execution of the sale deed could not, it was stated be considered as investments out of capital gains and should have been disallowed. The notice for reopening the assessment was issued on 29 March 2011 under Section 148. The reasons which have been disclosed to the Petitioner for reopening the assessment under a communication dated 6 April 2011 are as follows : "The assessee filed its return of income showing total income of Rs. 16,10,82,529/- for A.Y. 2004-05 on 31.10.2004. Assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter, "the Act") was made on 27.11.2006 determining a total income of Rs. 19,15,11,500/-. 2.0 The assessee has sold land at Wadala on 15.12.03 for Rs. 39,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was transferred for which consideration was realized; (b) the cost of the acquisition of the asset and (c) the investment which was made by the Petitioner in specified securities. Whether the assessee is eligible to claim an exemption under Section 54EC if the investment was made prior to the date of transfer is an inference upon which no disclosure is required to be made by the Petitioner. The Assessing Officer, it was urged, had duly applied his mind to the return; queries have been raised to which the Petitioner had furnished replies. 5. Consequently it was submitted that there being no failure on the part of the Petitioner to fully and truly disclose all the material facts the action to reopen the assessment beyond a period of four years cannot be justified. 6. On the other hand, it was urged on behalf of the Revenue that (i) In the original return of income that was filed by the Petitioner, there was a careful avoidance on the part of the Petitioner to disclose the dates on which investments were made in the specified bonds; (ii) Even after the Assessing Officer raised a query by his communication dated 14 July 2006 the Petitioner in its response once again did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heard to say that if the Assessing Officer were to conduct a further enquiry, he would come into possession of material evidence with the exercise of due diligence. An assessee cannot throw reams of paper at the Assessing Officer and rest content in the belief that the officer better beware or ignore the hidden crevices in the pointed material at his peril." 8. The Division Bench observed that the words "not necessarily" in Explanation 1 would indicate that whether there was a full and true disclosure within the meaning of the Section would depend upon the facts and circumstances of each case; that is to say on the nature of the document and the circumstances in which it is produced (reliance was placed in that regard on the judgment of the Calcutta High Court in Imperial Chemical Industries Ltd. v. ITO [1978] 111 ITR 614 and of the Delhi High Court in Rakesh Agarwal v. Asst. CIT [1996] 221 ITR 492. 9. The basic principle which has been laid down by the Supreme Court in CIT v. Bhanji Lavji [1971] 79 ITR 582 is whether the assessee has disclosed the primary facts which are necessary for assessment fully and truly. If the assessee has done so, the Assessing Officer is not entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the dates on which amounts were invested in bonds of the National Highway Authority of India, Rural Electrification Corporation of India and National Housing Bank. The assessee did enclose copies of the certificates which do bear the date of allotment. However, in our view, it is evident that the Assessing Officer had clearly not applied his mind to the question as to whether the assessee had fulfilled the conditions specified in Section 54EC for availing of an exemption. But more importantly the assessee in the present case was required to make a full and true disclosure of material facts which does not appear either from the computation of taxable long term capital gains in the original return of income or in the computation that was submitted in response to the query of the Assessing Officer. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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