TMI Blog2011 (2) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... on 41 of the Income-tax Act, 1961. Out of this, the assessee has credited a sum of Rs. 9.23 lakhs on account of provision for warranties no longer required written back under the head 'Other income' in the profit and loss account leaving a balance of Rs. 98.46 lakhs which has not been shown under the head 'Other income'. Therefore, this amount of Rs. 98.46 lakhs has not been offered for taxation by the assessee and the income of the assessee has been under-assessed by Rs. 98.46 lakhs. Further, it is seen that the assessee has earned dividend income of Rs. 188.73 lakhs on long-term nontrade investments which is claimed as exempt under section 10(33) of the Income-tax Act, 1961. However, there are various administrative expenses for earning the dividend income like the expenses on the personnel involved in taking the decision of investment, expenses related to purchase/sale of the investment like the DMAT fee, collection expenses, telephone expenses, etc., and other administrative expenses and only the net dividend income is exempt from taxation, therefore, these expenses relating to earning of dividend income are not allowable and income of the assessee has been under-assessed as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention of the petitioner is that ground No. 1 is factually incorrect. 5. Unfortunately, the petitioner in its objections dated November 14, 2007, filed before the Assessing Officer did not take this as a specific plea. The petitioner did not in the objections state under which headings this amount of Rs. 98.46 lakhs has been added back or included to enhance the taxable income by the said amount. The only statement made in the objection was that Rs. 1,07,69,936 was added back/credited to the profit and loss account and one item of Rs. 9,23,471 was reflected on the credit side of the profit and loss account. Even in the writ petition, the petitioner has not given complete break-up how and in what manner Rs. 98.46 lakhs was reflected in the different accounts. The break-up is given in the rejoinder affidavit filed in response to the counter-affidavit filed by the Revenue. Learned counsel for the petitioner, however, drew our attention to the reply given by the petitioner to the notice under section 154 of the Act. Copy of the said reply is on record. It is pointed out that the petitioner had given the full break-up and specific details with regard to credit/adjustment of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act : Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001." 8. The petitioner has relied upon the proviso to section 14A of the Act. The proviso, according to us, is not applicable in view of the factual matrix of the present case and does not protect or come to the aid of the petitioner. In the present case, after return of income for the assessment year 2000-01 was filed on November 30, 2000, the case was taken up in scrutiny. Assessment order under section 143(3) of the Act was passed on March 7, 2003. The proviso only bars reassessment/rectification and not original assessment on the basis of the retrospective amendment. The proviso does not stipulate and state that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not required to disclose the said fact as when they had filed the return, section 14A was not in the statute book. Sequitur there was no omission and failure on the part of the assessee-petitioner to make full and true disclosure. The term "failure" on the part of the assessee is not restricted only to the income-tax return and the columns of the income-tax return or the tax audit report. This is the first stage. The said expression "failure to fully and truly disclose material facts" also relate to the stage of the assessment proceedings, the second stage. There can be omission and failure on the part of the assessee to disclose fully and truly material facts during the course of the assessment proceedings. This can happen when the assessee does not disclose or furnish to the Assessing Officer complete and correct information and details it is required and under an obligation to disclose. Burden is on the assessee to make full and true disclosure. 11. In the case of Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394 (Delhi), the Delhi High Court has referred to several decisions of the Supreme Court and observed (page 403) : "In Kantamani Venkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial facts necessary for the purpose of assessment. The law casts a duty on the assessee to "disclose fully and truly all material facts necessary for his assessment for that year".' " (emphasis supplied) 12. The law postulates a duty on every assessee to disclose fully and truly all material facts for its assessment. The disclosure must be full and true. Material facts are those facts which if taken into accounts they would have an adverse effect on assessee by the higher assessment of income than the one actually made. They should be proximate and not have any remote bearing on the assessment. Omission to disclose may be deliberate or inadvertent. This is not relevant, provided there is omission or failure on the part of the assessee. The latter confers jurisdiction to reopen the assessment. 13. Whether or not there was a failure or omission to disclose fully and truly material facts, is essentially a question of fact. Section 14A was introduced with retrospective effect by the Finance Act, 2001, which was tabled in Parliament on February 28, 2001, and was passed by Parliament on April 1, 2001. The petitioner is a multinational company and it is difficult to percei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the income and expenditure account. There was, therefore, omission and failure on the part of the petitioner to disclose fully and truly material facts. 17. Decisions in the case of CIT v. SIL Investments Ltd. [2011] 339 ITR 166 (Delhi) decided on May 7, 2010 I. T. A. Nos. 700-701 of 2010, Rallis India Limited v. Asst. CIT [2010] 323 ITR 54 (Bom) and Sadbhav Engineering Ltd. v. Deputy CIT [2011] 333 ITR 483 (Guj) (Special Civil Application Nos. 5846 and 5847 of 2010) decided by the High Court of Gujarat are distinguishable. In these cases the legislative amendments with retrospective effect were made after the original assessment proceedings were completed and finalised. Thus, it was held the reopening was contrary to law. In the present case, section 14A of the Act was enacted and was in the statute book when the assessment proceedings were undertaken. Thus, there is no question of an impossible act or foreseeing a future amendment. The factum that the section 14A was in the statute book was known to the Assessing Officer and the petitioner when the original assessment order was passed. 18. Learned counsel for the petitioner had submitted that reopening proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. This reasoning is contrary and goes against the plea and argument of the petitioner as it accepts the difference in scope and ambit of the said provisions. It has been held that when mistakes are apparent, the Assessing Officer should invoke section 154 of the Act but in cases where mistakes are not apparent from the record, the Assessing Officer can reopen assessments under section 147 of the Act when the pre-conditions are satisfied. 21. Rectification of a mistake apparent from the record cannot be equated with the power of reopening under sections 147 and 148 of the Act, which is conferred on the Assessing Officer to reopen cases underassessment when conditions mentioned in the said section are satisfied. The object and purpose of the two provisions is separate and the pre-conditions and requirements are different. The words "reasons to believe" when income chargeable to tax as escaped assessment has a different connotation and requirements and cannot be equated with the power under section 154 to rectify mistakes apparent from the record. In some cases albeit not in all cases, sections 154 and 147 both may be applicable and, therefore, the aforesaid decisions su ..... X X X X Extracts X X X X X X X X Extracts X X X X
|