2002 (8) TMI 69 - HC - Income Tax

Reassessment, Failure To Disclose Material Facts - It has, therefore, been admitted in the petition that an income accrued in a particular year was not shown either in the balance sheet or in the returns for that particular year as the forfeiture was delayed by the petitioner. It is not the case of the petitioner in the petition that either at the time of furnishing the returns or in the balance-sheet submitted along with the returns or while supplying information and producing books of account at the time of assessments, the petitioner had disclosed to the Assessing Officer that any income arising out of forfeiture accrued in the assessment year was for commercial wisdom taken over to the next year. In that view of the matter, the second limb of the requisite for exercise of power under section 148 of the said Act is fulfilled and prima facie it appears that there was failure on the part of the petitioner to disclose fully and truly all the material facts necessary for assessment during the relevant assessment years while submitting the return and furnishing information. - For the reasons aforesaid, I refuse to entertain these writ petitions and accordingly, dismiss the same.

Summary

Issues Involved:
1. Validity of notices issued under section 148 of the Income-tax Act, 1961, for reopening assessments for the assessment years 1973-74, 1980-81, and 1981-82.
2. Grounds for exercising power under section 148.
3. Adequacy of reasons to believe that income had escaped assessment.
4. Fulfillment of the condition of failure to disclose fully and truly all material facts necessary for assessment.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148:
The writ petitions challenge the notices dated March 28, 1989, issued under section 148 of the Income-tax Act, 1961, for reopening assessments for the assessment years 1973-74, 1980-81, and 1981-82. The grounds for reopening were based on auditors' observations, Supreme Court's observations, and the Reserve Bank of India's inspection report.

2. Grounds for Exercising Power Under Section 148:
The grounds for exercising power under section 148 included:
- Excess funds in the Social Welfare Scheme Fund compared to liabilities.
- Retention of forfeited amounts and unclaimed matured certificates in the fund.
- Generous distribution of commissions leading to high dropout rates.
- Large-scale lapsation of certificates.

3. Adequacy of Reasons to Believe Income Had Escaped Assessment:
The court noted that the auditor's report, which indicated that the Social Welfare Scheme Fund exceeded the actual liability, was sufficient to form a prima facie reason to believe that income chargeable to tax had escaped assessment. The Income-tax Officer's reliance on multiple sources of information, even if only one source was dependable, was deemed adequate.

4. Fulfillment of the Condition of Failure to Disclose Fully and Truly All Material Facts:
The court examined whether the petitioner had failed to disclose fully and truly all material facts necessary for assessment. The petitioner admitted that income from forfeited certificates was not shown in the balance sheet or returns for the relevant year due to delayed forfeiture. This non-disclosure fulfilled the second condition for exercising power under section 148, as it indicated a failure to disclose all material facts fully and truly.

Conclusion:
The court concluded that the auditor's report provided sufficient prima facie evidence to believe that income had escaped assessment. Additionally, the petitioner's failure to disclose the income from forfeited certificates in the relevant year constituted a failure to disclose all material facts fully and truly. Consequently, the writ petitions were dismissed, and the notices issued under section 148 were upheld.

Order:
The writ petitions were dismissed with no order as to costs. All interim orders were vacated, and the prayer for a stay of the operation of the order was refused.