2013 (1) TMI 19 - HC - Income Tax

Escaped assessment Re opening of assessment Search u/s 132 Statement on oath u/s 132(4) - Whether filing the ROI before the wrong A.O. amounts to non-filing of return Held that - The said ground for reopening the assessment is, therefore, not a valid ground. On the basis of such return the concerned A.O. has already framed assessment u/s 143(3) in respect of which the respondent in the affidavit-in-reply has stated that the assessment order does not lack jurisdiction. Thus, for this reason also, the said ground is rendered unsustainable Whether there was any failure on the part of the petitioner to disclose fully and truly all material facts for his assessment Held that - Assessee had not disclosed to the AO that he had made such disclosure which he had subsequently retracted as according to him, there is no duty cast upon him to make such disclosure while filing his return of income. It is true that the petitioner had subsequently retracted the said statement. However, the petitioner in his statement recorded during the course of search having stated that the said income would be disclosed while filing the return for A.Y. 1995-96 ought to have brought such fact to the notice of the Assessing Officer. The contention that there was no obligation cast upon the petitioner to make such disclosure while filing the return of income, does not merit acceptance. Assessing Officer had made some efforts and examined the record of the previous assessment year, he may have come to know that this was a search and could have taken consequent action thereon. However, that by itself would not absolve the petitioner from the duty to disclose all primary facts before the Assessing Officer Merely because the format in which the return is required to be filed does not provide for any column wherein the assessee is required to state that this is a search case and that he had made certain disclosures during the course of search, does not mean that an assessee is not required to disclose other facts that are material for his assessment At the cost of repetition it may be stated that the fact regarding the petitioner having made a disclosure, though subsequently retracted, was material for the assessment of the petitioner for the assessment year under consideration. Thus, by not disclosing such material fact, evidently, the petitioner has failed to disclose fully and truly all material facts necessary for his assessment Decision - Appeal decides in favour of revenue

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer.
3. Failure to disclose material facts fully and truly.
4. Time-barred reopening of assessment.

Issue-Wise Detailed Analysis:

1. Validity of Reopening the Assessment Under Section 147:
The petitioner challenged the notice dated 25th May 2001, issued by the respondent to reopen the assessment for the assessment year 1995-96. The reasons for reopening included the disclosure of unaccounted income of Rs. 25,15,753/- during a search on 21st April 1995, which was not included in the original assessment. The court noted that the petitioner had retracted his disclosure but failed to inform the Assessing Officer about the search and the subsequent retraction while filing the return. The court held that the fact regarding the search and the disclosure was a primary fact that should have been disclosed during the assessment proceedings. Therefore, the assumption of jurisdiction by the Assessing Officer under Section 147 was valid.

2. Jurisdiction of the Assessing Officer:
The petitioner contended that the return for the assessment year 1995-96 was filed with the Income Tax Officer, Ward 1(2), Rajkot, who had jurisdiction at the time. The respondent argued that the jurisdiction lay with the Investigation Circle due to the search conducted. The court noted that the petitioner was not informed about the change in jurisdiction and continued to file returns with his regular Assessing Officer. The court referred to its previous judgment, stating that if the Department had accepted the returns and the taxes paid, it could not later claim that the returns were invalid due to being filed with the wrong officer. The court concluded that the ground for reopening based on jurisdiction was not valid.

3. Failure to Disclose Material Facts Fully and Truly:
The court examined whether there was any failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment. It was noted that the petitioner had made a disclosure during the search but retracted it later. However, the petitioner did not inform the Assessing Officer about the search or the retraction while filing the return. The court held that the petitioner had failed to disclose primary facts, which were material for the assessment. The Supreme Court's rulings in Calcutta Discount Co. Ltd. v. ITO and Malegaon Electricity Co. (P) Ltd. v. CIT were cited to emphasize that the duty of disclosing all primary facts lies on the assessee. Therefore, the failure to disclose these facts justified the reopening of the assessment.

4. Time-Barred Reopening of Assessment:
The petitioner argued that the notice for reopening the assessment was issued beyond the period of four years from the end of the relevant assessment year, making it time-barred. The court noted that under the proviso to Section 147, the Assessing Officer must record satisfaction that there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment. The court found that the petitioner had failed to disclose the primary facts regarding the search and the disclosure, which justified the reopening of the assessment even beyond the four-year period.

Conclusion:
The court dismissed the petition, holding that the reopening of the assessment under Section 147 was valid due to the failure of the petitioner to disclose fully and truly all material facts. However, the reopening was limited to the three items that were not already taxed in other assessment years. The interim relief granted earlier was vacated, and the rule was discharged with no order as to costs.