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TMI Blog2011 (11) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 land in the amount of Rs. 38.75 Crores were considered separately. The Petitioner annexed a working of the taxable long term capital gains. The total long term capital gains were computed at Rs. 23.19 Crores. The Petitioner claimed an exemption under Section 54EC of the Income Tax Act 1961 stating that a total amount of Rs. 23.24 Crores had been invested in specified bonds of the National Highway Authority of India (Rs. 2 Crores), the Rural Electrification Corporation of India (Rs. 14.44 Crores) and the National Housing Bank (Rs. 6.80 Crores). The computation of capital gains in the amount of Rs. 23.19 Crores as stated earlier was based on the total consideration of Rs. 39 Crores received for the sale of development rights under the conveyance executed on 31 December 2003; from which amount an amount of Rs. 15.80 Crores was deducted representing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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. 39,00,00,000/- (Rs. Thirty Nine Crores only) and after availing the indexation cost at Rs. 15,80,92,967/-, the Long Term Capital Gain was arrived at Rs. 23,19,07,033/-. The assessee has claimed exemption u/s 54 EC by investing the amount in the specified bonds. Scrutiny of the bonds revealed that only an amount of Rs. 6.80 crores deposited in National Housing Bank is eligible for exemption as it has been invested on 30.04.2004 i.e. within 6 months from the date of sale deed. The remaining amounts invested in Rural Electrification Corpn. Ltd. and National Highway Authority of India were pertained to the prior periods i.e. 1.2.02 to 30.6.02. These investments were made prior to the date of transfer (15.12.2003). As such the allowance of exemption u/s 54EC on the above investment valued at Rs. 21.24 crores is irregular. The investments in those bonds are made prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not specifically point out the dates on which investments were made in the specified bonds; (iii) The Assessing Officer had in the circumstances not applied his mind to the question as to whether the Petitioner had fulfilled the necessary requirements for an exemption under Section 54EC; (iv) The mere submission of certificates by the Petitioner would not amount to a full and true disclosure of material facts having regard to the provisions of Explanation 1 to Section 147. 7. The reopening of the assessment has in the present case been sought to be effected by a notice dated 29 March 2011 which is beyond a period of four years of the end of the relevant Assessment Year 2004-05. In such a case the first proviso to Section 147 mandates that the validity of the reopening of the assessment must depend upon whether there was a failure on the part of the assessee to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 entitled on a mere change of opinion to commence proceedings for reassessment. If the Assessing Officer has been apprised of all the primary facts necessary for assessment he may well have raised a wrong legal inference from the facts disclosed. On that count he would not be justified in reopening the assessment. Essentially, therefore in each case the Court has to determine as to whether there was a full and true disclosure of primary facts by the assessee. The full and true disclosure which the statute contemplates must be judged in the context of Explanation 1 to Section 147. The assessee cannot merely rely upon the fact that if the Assessing Officer had followed an enquiry with due diligence on the basis of the account books or other evidence produced by the assessee, he could have discovered material evidence. The mere production of account books or other evidence from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. Full and true disclosures must mean what the statute says. These disclosures cannot be garbled or hidden in the crevices of the documentary material which has been filed by the assessee with the Assessing Officer. The assessee must act with candor and the disclosure must be full and true. A full disclosure is a disclosure of all material facts which does not contain any hidden material or suppression of fact. A true disclosure is a disclosure which is truthful in all respects. Just as the power of the Revenue to reopen an assessment beyond a period of four years is restricted by the conditions precedent spelt out in the proviso to Section 147, equally an assessee who seeks the benefit of the proviso to Section 147 must make a full and true disclosure of all primary facts. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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