2016 (5) TMI 1392 - HC - Income Tax

Reopening of assessment - allowance of claim under Section 35AB - Held that - Provisions of Section 147 of the Income Tax Act 1961 can be invoked when an assessee is guilty of not disclosing fully and truly all materials facts necessary for its assessment for that assessment year. In the facts of the case the allegation is that the petitioner had claimed deductions in excess of the amount that it is entitled to for the relevant year. The impugned order dated May 22 2001 alleges that the petitioner is guilty of failing to disclosure fully and truly all relevant facts for the allowance of claim under Section 35AB of the Income Tax Act, 1956 and therefore income assessable to tax had escaped assessment. The petitioner had entered into an agreement with a foreign supplier for the purpose of acquiring technical knowhow. This agreement was disclosed to the Assessing Officer. The petitioner had sought permission from the Assessing Officer to remit the technical knowhow fees to the foreign supplier. This fact would appear from the exchange of correspondence between the petitioner and the assessment officer dated June 22 1993 December 13 1996 and December 19 1996. In fact the Assessing Officer had granted permission by writing dated December 19 1996 to make the remittance. The petitioner has also disclosed its audited balance-sheet as also the quantum of remittance made and the manner calculated and arriving at the quantum of deductions claimed by the petitioner for the relevant assessment year. The assessment year was assessed on scrutiny under Section 143(3) of the Income Tax Act 1961. The Assessing Officer was silent on account of the deductions claimed. He had allowed the amount of deductions claimed on such head in the order of assessment under Section 143 3 of the Income Tax Act 1956. The petitioner is not guilty of disclosing fully and truly all materials facts necessary for its assessment for the relevant assessment year. Therefore applying the ratio laid down in Gemini Leather Stores (1975 (5) TMI 1 - SUPREME Court) and Ganesh Housing Corporation Ltd (2012 (3) TMI 211 - GUJARAT HIGH COURT) even if the assessment had escaped the notice of Assessing Officer the provisions of Section 147 of the Income Tax Act 1961 cannot be invoked to address such issue.

Summary

Issues:
Assessment year 1994-1995, Invocation of Sections 147 and 148 of the Income Tax Act, 1961, Claim on account of acquisition of technical knowhow, Allegation of suppression or concealment of data, Disclosure of all relevant facts, Jurisdiction of the Assessing Officer under Section 147, Compliance with Section 35AB of the Income Tax Act, 1956.

Analysis:

The petitioner challenged an order dated May 22, 2001, issued by the Joint Commissioner of Income Tax under Sections 147 and 148 of the Income Tax Act, 1961, through a notice under Section 148. The petitioner contended that the Assessing Officer wrongly alleged suppression or concealment of data without providing a basis for such claim. The petitioner argued that the Assessing Officer lacked jurisdiction under Sections 147 and 148, citing legal precedents like Gemini Leather Stores and Ganesh Housing Corporation Ltd. The Department defended the Assessing Officer's actions without providing further submissions (Gemini Leather Stores).

The Assessing Officer's order claimed that the deduction for technical knowhow acquisition was excessive and demanded the petitioner to rectify the difference. The petitioner had previously disclosed the agreement with the foreign supplier for technical knowhow acquisition and had sought permission for remittance, which was granted by the Assessing Officer. The petitioner had also provided audited balance sheets and detailed calculations for claimed deductions. Despite the Assessing Officer's silence on the deductions during the assessment under Section 143(3), the deductions were allowed in the final assessment order (Gemini Leather Stores, Ganesh Housing Corporation Ltd).

The Court considered the disclosure of all relevant facts by the petitioner and found that the petitioner had not failed to disclose necessary information for assessment. Relying on legal precedents, the Court concluded that even if the assessment had escaped the Assessing Officer's notice, invoking Section 147 was not justified. Consequently, the Court set aside the impugned notice and order dated May 22, 2001, in favor of the petitioner, allowing the writ petition (Gemini Leather Stores, Ganesh Housing Corporation Ltd).