TMI Blog1999 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... er known as Delhi Cattle Breeding Farm (P.) Ltd. till February, 1983, was assessed to income-tax in the status of a company and its accounting period ended on June 30 of each of the relevant years. Certain agricultural lands, in which it was granted bhumidari rights in the year 1959 were acquired under the Land Acquisition Act, 1894, under three awards made by the Land Acquisition Collector on December 19, 1962, March 21, 1963, and February 20, 1964, and possession of pieces of land covered under these awards was taken on January 10, 1963, April 20, 1963, and May 1, 1964, respectively. Certain disputes arose between the original land owners, the first lessee and the predecessor of the petitioner-company, claiming ownership of the said agricultural lands and the question was as to who was/were entitled to receive the compensation. The said disputes were finally settled by an order passed by the Supreme Court of India, whereunder the petitioner's predecessor company became entitled to receive 64 per cent. of the 2/3rds of the total compensation and the interest thereon. Consequently, in February, 1973, the predecessor company received a sum of Rs. 7,64,787.28 as compensation and an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the aforesaid amount of interest may not be taxed. The Assessing Officer passed the assessment order in respect of the said year and the amount of interest was not added to the income of the petitioner. By judgment and order dated August 27, 1984, the High Court accepted the appeal filed by the petitioner and ordered further enhancement of compensation and interest payable thereon. The cross-appeals of the Government of India were dismissed. It is claimed by the petitioner that the fact of the appeal having been decided in favour of the petitioner by the High Court was brought to the notice of the Assessing Officer vide the petitioner's letter dated August 6, 1986, during the course of assessment proceedings for the assessment year 1984-85. In the said letter receipt of Rs. 32,63,452.58 was disclosed. The Assessing Officer passed the assessment order in respect of the assessment year 1984-85 on September 30, 1986, noticing therein the receipt of compensation and interest but no part of interest on the compensation was brought to tax in the said assessment year. During the course of assessment proceedings for the assessment year 1985-86, the petitioner claims to have informed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the petitioner. Copies of the reasons recorded by the Assessing Officer for reopening the assessments under section 147(a) have been placed on record by the petitioner. The reasons for all the years involved are the same and the relevant portion thereof reads as under : "The assessee-company became entitled to interest on enhancement first in January, 1981, as the Additional District Judge had given his award on January 31, 1981. Prior to this order, the assessee-company had been fighting for enhanced compensation with interest thereon. The assessee failed to disclose this information in the return filed for earlier years. The interest was received on January 25, 1982, but still the income so received was not included in the return even on accrual basis either with reference to the date of the order of the Additional District Judge, Delhi, or the date of receipt of the amount. Again the interest of Rs. 1,31,41,287 had accrued to the assessee on June 8, 1984, when the High Court decided the matter in the assessee's favour but still the assessee failed to disclose this income in his return." The action of the Assessing Officer in issuing notices under section 148 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on covered under the three awards, amounting to Rs. 1,31,41,286.80 which was received by the petitioner in September, 1988. In the affidavit in opposition filed on behalf of the Assessing Officer it is stated that : (i) in the assessment years 1972-73 to 1982-83, the petitioner did not disclose the material fact that it had gone in appeal against the order of the Land Acquisition Collector and had claimed higher compensation and interest, (ii) the interest of Rs. 32,63,453 was received by the petitioner on January 31, 1982, as a result of the Additional District Judge's order and the said interest- was assessable on receipt basis in the previous year ended June 30, 1982, i.e., assessment year 1983-84, but the assessee did not declare any such interest income in its return for the said assessment year and instead in its letter dated June 27, 1983, claimed that the interest received on the said compensation had not been shown as income during the year since the Government of India had appealed against the award in totality, and (iii) in its balance-sheet as on June 30, 1982, the petitioner had appended the following note : "1. During the year, the company has received Rs. 62,16,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year) ... Explanation 2.---Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence, have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section." From the aforenoted provisions of law, it is evident that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary for assessment differ from case to case. The question whether there is a disclosure or not within the meaning of section 147(a) also depends on the facts and circumstances of each case and is also required to be tested on the anvil of Explanation 2 to section 147, which provides that mere production of evidence before the Assessing Officer would not per se be enough and there may be an omission or failure on the part of the assessee to make full and true disclosure if some material evidence for the assessment lay embedded in the evidence produced, which on due diligence the Assessing Officer could have discovered but did not. At the same time, as observed by the Supreme Court in Calcutta Discount Company's case [1961] 41 ITR 191, it is not for somebody else, far less the assessee, to tell the Assessing Officer what inferences, whether on facts or law, should be drawn from the primary facts placed before him by an assessee. If the income declared is not acceptable to the Assessing Officer, he is obliged to investigate and bring to tax the correct income. Even the object of Explanation 2 to section 147, casting an obligation on the assessee to bring to the notice of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The company has made reference petition under section 18 of the Land Acquisition Act for enhancement of compensation which is still pending for decision in the Court of Additional District Judge, Delhi, and is undetermined (emphasis' added by us). EXTRACT OF PROFIT AND LOSS ACCOUNT : Notes : Interest on compensation for land for the accounting year ended on June 30, 1973, is Rs. 20,357.91 while the balance Rs. 2,79,486.47 is on account of interest for previous years from August 9, 1965, to June 30, 1972." A similar note with regard to the pendency of reference under section 18 of the Land Acquisition Act appears in the annual report for the period ended June 30, 1980. In its annual accounts for the period ended June 30, 1981, the following note was appended : "Note : On company's reference petition under section 18 of the Land Acquisition Act for enhancement of compensation the Court of Additional District Judge, Delhi, has given its judgment, but the company being aggrieved with the order has preferred an appeal before the High Court at Delhi. The extent of increase in compensation receivable in terms of judgment of the Additional District Judge, Delhi, has not been worked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the matter in the courts. It is, therefore, obvious that the entire establishment expenses claimed cannot be incidental to earning of interest income." Following this order similar disallowances were made consistently for the assessment years 1976-77 to 1982-83, which shows that the Assessing Officer was fully aware of the facts that the assessee is in litigation with respect to enhancement of compensation. We find that having disclosed every material fact with regard to the acquisition of its lands ; the amount(s) and the time when compensation/ additional compensation was received and all these facts having been noticed by the Assessing Officer in the assessment orders for the years under consideration, if cannot be said that still the petitioner failed to disclose fully and truly all material facts necessary for its assessment for the relevant assessment years. For creating the present situation, the Department has to blame itself for the failure of its officers to apply the correct principles of law to the facts disclosed by the petitioner. It bears mention that conscious of this lacuna in the Act, the Legislature amended section 150 of the Act by the Direct Tax Laws (Am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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