2011 (9) TMI 800 - HC - Income Tax

Reassessment - Addition - Time limitation - learned Counsel for the revenue assailing the impugned order contends that no doubt the assessee had annexed a note to the original return, but the contents of the note did not fully and truly set out the facts, which are required in law - It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the-concerned assessment year - In the assessee s case, by failing to bring out the nexus between the 10A unit and the interest income, the assessee has not discharged its responsibility of furnishing full disclosure of facts - Assessing Authority has not properly applied his mind towards the statutory provisions and has not taken into consideration that the original assessment passed under Section 143(3) which was also reopened once and adjustment was made, It is for the second time, he was raising all these objections - Appeals are dismissed

Summary

Issues:
1. Reopening of assessment under Section 147 of the Income Tax Act after four years.
2. Requirement of fully and truly disclosing material facts for assessment.
3. Justification of Assessing Authority in reopening the assessment.
4. Interpretation of the note attached to the original return by the assessee.

Analysis:

Issue 1: Reopening of assessment under Section 147 after four years
The Tribunal set aside the order passed by the Appellate Commissioner and the original assessment order, stating that the proviso to Section 147 imposes restrictions on reopening assessments completed under Section 143(3) after four years unless there was a failure to disclose material facts. The Tribunal emphasized that the assessee had not withheld any material facts at the time of filing the return and that the assessment was sought to be reopened on grounds that did not meet the condition precedent for reassessment. Citing the judgment of the Bombay High Court, the Tribunal concluded that the reassessment after the expiry of four years was not permissible due to a lack of evidence of non-disclosure of material facts.

Issue 2: Requirement of fully and truly disclosing material facts
The Tribunal highlighted that the Assessing Authority failed to demonstrate any failure on the part of the assessee to fully and truly disclose material facts necessary for assessment. It was emphasized that the reasons recorded by the Assessing Officer should clearly indicate any such failure, and the order should explicitly state if there was a lack of disclosure. The Tribunal concluded that the note attached by the assessee to the return sufficiently disclosed all relevant particulars, including the treatment of interest income under Section 10A, thus meeting the requirement of full and true disclosure.

Issue 3: Justification of Assessing Authority in reopening the assessment
The revenue contended that the contents of the note attached to the original return did not fully and truly set out the necessary facts, justifying the reassessment. However, the Tribunal and the High Court disagreed, emphasizing that the note provided clear details regarding the interest income and its treatment under Section 10A. The High Court further stated that the Assessing Authority failed to properly apply statutory provisions and considerations in reopening the assessment, especially after the assessment had already been reopened once before.

Issue 4: Interpretation of the note attached to the original return
The High Court analyzed the note attached by the assessee, which clearly outlined the interest income subject to tax and the portion eligible for exemption under Section 10A. The Court concluded that the note fully disclosed the relevant particulars, and the Assessing Authority's objections regarding the nexus between the interest income and the 10A unit were unfounded. The Court upheld the Tribunal's decision that the reassessment was legally invalid due to being time-barred and lacking legal merit.

In conclusion, the High Court dismissed the appeals, affirming the Tribunal's decision that no substantial question of law arose from the case, and the reassessment was not justified under the law.