2013 (3) TMI 536 - HC - Income Tax

Reopening of assessment - as per AO there was a short term capital gain of Rs. 2.80 crores which was not offered to tax as a result of which there was an under assessment of income by Rs. 2.80 crores - Held that - The computation of income that was filed by the assessee together with the return of income stated that the assessee had purchased 10 lakh shares of DFPCL on 9 December 1994 at a cost of Rs. 2.86 crores. The assessee claimed that it sold the shares on 10 May 2004. It was on this basis that the assessee claimed the benefit of indexation. What the assessee failed to disclose in the computation was the fact that the payment of Rs. 2.57 crores for the shares was in fact made on 30 January 2004. This was a fact which ought to have been disclosed to the AO but which was not disclosed even in the further letter of the assessee dated 24 September 2007. In that letter the assessee disclosed the initial payment of Rs. 28.65 lakhs on 9 December 1994 but carefully avoided disclosure of the fact that the payment of Rs. 2.57 crores was made only on 30 January 2004. Finally it was on 30 January 2004 that the assessee addressed a communication to the Assessing Officer containing as many as fourteen annexures. One of them was a share certificate of DFPCL. That share certificate contained an endorsement to the effect that the assessee has paid the final call on 30 January 2004. Explanation (1) to Section 147 provides that the production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer would not amount to a disclosure within the meaning of the proviso. The nature of the disclosure has to be assessed in the facts and circumstances of each individual case. In the present case there was a failure on the part of the assessee to make a disclosure that was candid frank and true of the fact that it was only on 30 January 2004 that the assessee had made a payment of Rs. 2.57 crores for the acquisition of the shares of DFPCL. In these circumstances it cannot be said that the invocation of the jurisdiction to reopen the assessment beyond the period of four years did not fulfill the jurisdictional requirement. AO acted within jurisdiction since the record would indicate that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year - against assessee.

Issues:
1. Validity of notice issued by Assessing Officer seeking to reopen an assessment for A.Y. 2005-06 beyond the prescribed period.
2. Failure of the assessee to disclose all material facts necessary for assessment.
3. Interpretation of what constitutes full and true disclosure of material facts by the assessee.
4. Assessment of whether the assessee's actions amounted to suppression of material facts.
5. Compliance with legal provisions regarding disclosure of material facts by the assessee.
6. Jurisdictional requirement for reopening assessment beyond four years.
7. Evaluation of the Assessing Officer's jurisdiction in reopening the assessment.

Analysis:

1. The judgment revolves around the challenge of a notice issued by the Assessing Officer to reopen an assessment for A.Y. 2005-06, issued beyond the four-year period from the end of the relevant assessment year. The reasons for reopening were disclosed to the assessee after the notice was issued.

2. The crux of the issue lies in the failure of the assessee to fully and truly disclose all material facts necessary for the assessment. The Assessing Officer contended that there was a long term capital loss on the sale of shares, which the assessee did not disclose accurately.

3. The judgment delves into the concept of full and true disclosure of material facts by the assessee, citing previous court rulings. It emphasizes that the disclosure must be candid, frank, and true, without any hidden material or suppression of facts.

4. The contention from the Revenue's side is that the assessee suppressed a crucial fact regarding the payment made for the shares, leading to incorrect disclosures in the computation submitted with the return of income. The Revenue argued that the assessee's actions amounted to a suppression of material facts.

5. The case evaluates whether the assessee's actions complied with legal provisions regarding the disclosure of material facts. The court considered the timing and accuracy of the disclosures made by the assessee during the assessment proceedings.

6. The judgment discusses the jurisdictional requirement for reopening assessments beyond four years, emphasizing the necessity of a failure on the part of the assessee to disclose all material facts. The court referred to previous judgments to support this requirement.

7. Ultimately, the court upheld the Assessing Officer's jurisdiction in reopening the assessment, concluding that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As a result, the petition challenging the notice for reopening the assessment was dismissed.

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