TMI Blog2013 (4) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... r failure, on the part of the assessee, to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year. A finding to the effect that there was omission or failure on the part of the assessee to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year, is sine qua non for assumption of jurisdiction by AO for re-assessment of income, which escaped disclosure. See Dulichand Singhania v. ACIT [2003 (12) TMI 23 - PUNJAB AND HARYANA High Court (P&H).] In the present case since the present case did not suffer from non-disclosure or omission to disclose 'fully and truly' the facts by the assessee, the Assessing Officer could not have been held, and was rightly not held by the learned Tribunal, to have had the jurisdiction to re-open the assessment and make assessment as in the present case. Re-opening of the assessment and making of the re-assessment were bad in law and the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year and thereby the assessee had been granted greater reliefs than what the assessee was entitled to and, hence, Sub-Clause (iii) of Clause (c) of Explanation 2 was attracted to the facts of the present case and the contention of the assessee that the materials, placed by him before the Assessing Officer, contained the information that the assessee had received transport subsidy during the assessment year was not sufficient to deny to the Assessing Officer the jurisdiction to re-open the assessment inasmuch as Explanation 1, according to Mr. Hazarika, makes it clear that production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of Section 147, would not be attracted to the facts of the present case. 6. In support of his above submissions, Mr. Hazarika places reliance on Honda Siel Power Products Ltd. v. Deputy Commissioner of Income Tax and another, reported in [2012] 340 ITR 53 (Delhi). 7. Resisting the appeal, Mr. R. Goenka, learned counsel, has submitted that unless there is an omission or failure, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a re-assessment proceeding. Responding to the notice, dated 28.11.2003, the assessee submitted its reply, on 31.12.2003, contending therein to the effect, inter alia, that the assessee's return, already filed on 27.11.1997, for the assessment year 1997-1998, be treated as the return filed pursuant to the notice under Section 148 of the IT Act. (ii) The assessee was, however, re-assessed, on 10.03.2005, under Section 147 of the IT Act, adding thereby an amount of Rs. 24,70,559/-, which the assessee had received as transport subsidy, for the assessment year 1997, holding the said sum of transport subsidy as taxable income of the assessee. (iii) Aggrieved by the re-opening of the assessment and imposition of the tax, the assessee preferred an appeal, which the Commissioner of Income Tax (Appeal) dismissed, on 26.03.2007, upholding the order of the Assessing Officer by taking the view that there were valid reasons for the Assessing Officer to re-open the assessment and that his action was justified. (iv) Dissatisfied with the dismissal of its appeal, the assessee carried the matter, in appeal, to the Income Tax (Appellate) Tribunal, Guwahati Bench. By its order, dated 03.06.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be cases where income chargeable to tax has escaped assessment, namely:- (c) where an assessment has been made, but:- (i) Income chargeable to tax has been under assessed; or (ii) Such income has been assessed at too low a rate; or (iii) Such income has been made the subject of excessive relief under this Act; or (iv) Excessive loss or depreciation allowance or any other allowance under this Act has been computed." (Emphasis is added) 10. A careful reading of Section 147, as a whole, shows that if the Assessing Officer has reason to believe that any income, chargeable to tax, has escaped assessment in any assessment year, he may, subject to the provisions of Section 147, assess or re-assess such income and also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under Section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. 11. To the power of re-opening of an assessment, under Section 147, on the ground that an income, chargeable to tax, had escaped assessment for a given assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the failure, on the part of the assessee, to disclose 'fully and truly' all material facts necessary for his assessment. 16. The question, therefore, which, now, naturally arises is: whether the Explanation 1 and/or the Explanation 2 override the conditions precedent, embodied in the proviso to Section 147, for the purpose of re-opening of an assessment? 17. In Associated Stone Industries Ltd. v. CIT, Rajasthan, reported in [1997] 224 ITR 560 (SC), the Supreme Court has pointed out that the duty of an assessee is only to 'fully and truly' disclose all material facts and that the expression, 'material facts', appearing in Section 34(1)(a) of the IT Act, refers only to primary facts meaning thereby that the duty of the assessee is only to 'fully and truly' disclose all primary facts and that there is no duty, which the law casts on an assessee to indicate to the Assessing Officer or draw attention of the Assessing Officer what factual, legal or other interferences can be drawn from the already available primary facts disclosed by the assessee. 18. Having analysed the provisions contained in Section 34(1)(a) of the IT Act embodying scheme of opening of an assessment, the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar less the assessee - to tell the Assessing Authority what inference, whether on facts or on law, should be drawn. The relevant observations, appearing in this regard, in Calcutta Discount Company Ltd. (supra), read as under: "Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee - to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts. If from primary facts more inferences that one could be drawn, it would not be possible to say that the assessee should have drawn any particular infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable: See Calcutta Discount Co. v. Income-tax Officer [1961] 41 ITR 191, 201 (SC)." (Emphasis supplied) 23. Relying, once again, on Calcutta Discount Co. Ltd. (supra), the Supreme Court pointed out, in Parashuram Pottery Works (supra), that law casts, on the assessee, an obligation to disclose facts; secondly, the facts must be material; thirdly, disclosure must be full; and; fourthly, disclosure shall be true. What facts shall be treated as material and necessary for an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation 2 to Section 147 inasmuch as these Explanations do not enlarge the scope of the proviso to Section 147. This position of law is rendered beyond dispute if one carefully reads the following observations made in Calcutta Discount Co. Ltd. (supra): "It may be pointed out that the Explanation to the sub-section has nothing to do with "inferences" and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose "inferences" - to draw the proper inferences being the duty imposed on the Income-tax officer. We have, therefore, come to the conclusion that while the duty of the assessee is to disclose 'fully and truly' all primary relevant facts, it does not extend beyond this." (Emphasis supplied) 27. The reason for re-opening of the assessment, in the present case, is that the assessee had not included the amount received as transport subsidy in the annual income of the assessee. An A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of realization of tax. In fact, in CIT v. Corporation Bank Ltd 254 ITR 791 (SC), it has been pointed out by the Supreme Court that disclosure, in the balance sheet, amounts to full and true disclosure of material facts necessary for assessment. The observations, made in this regard, which are relevant for our purpose, read as under: "Turning attention to the first question as regards the provisions under Section 147(a) be it noted and as the facts depict, there is no failure on the part of the assessee in furnishing the particulars pertaining to the above noted sum as not recoverable for the relevant accounting year and the statements filed along with the original return disclosed the full details of the aforesaid account. There is, therefore, no failure on the part of the assessee to disclose 'fully and truly' the material facts necessary for the assessment years for the respective years and as such section 147(a) has no manner of application and is not attracted in the facts of the matter under consideration. The High Court on consideration of the facts came to the conclusion that the Tribunal was justified in coming to the said finding and we also record our conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not suffer from non-disclosure or omission to disclose 'fully and truly' the facts by the assessee, the Assessing Officer could not have been held, and was rightly not held by the learned Tribunal, to have had the jurisdiction to re-open the assessment and make assessment as in the present case. 35. While considering the case of Honda Siel Power Products Ltd. (supra), which Mr. Hazarika has relied upon, it needs to be noted that Honda Siel Power Products Ltd. (supra) was a case, wherein there was an omission on the part of the petitioner to disclose the expenses incurred relatable to tax free/exempted income and since expenses were not disclosed, inference by way of re-assessment of income was upheld. The facts of Honda Siel Power Products Ltd. (supra) are, as already discussed above, quite different from the facts of the present case inasmuch as all the material facts, which were necessary for making a correct assessment, had been furnished, in the case at hand, to the Assessing Officer and when the Assessing Officer had failed to make correct assessment, the Revenue cannot blame the assessee and take recourse to the proviso to Section 147 for the purpose of re-opening the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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