2013 (4) TMI 422 - HC - Income Tax

Re opening of assessment - as per AO the assessee company has received subsidy from Assam Govt. which was not included in the total income of the assessee during year 1996-1997 - Tribunal quashed the reassessment order passed by the AO u/s.l43(3)/147 on the ground that the reassessment proceeding initiated was barred by limitation - Held that - The reason so assigned by AO shows that the information regarding transport subsidy was available in the audited accounts and statements furnished by the assessee to the AO along with the assessee s return. These details being available before the AO cannot say that there was omission or failure on the part of the assessee to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In fact there is not even a particle of accusation in the re-assessment order to show that the escapement of income in the present case was because of the omission or failure on the part of the assessee to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. A finding to the effect that there was omission or failure on the part of the assessee to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year is sine qua non for assumption of jurisdiction by AO for re-assessment of income which escaped disclosure. See Dulichand Singhania v. ACIT 2003 (12) TMI 23 - PUNJAB AND HARYANA High Court (P&H). In the present case since the present case did not suffer from non-disclosure or omission to disclose fully and truly the facts by the assessee the Assessing Officer could not have been held and was rightly not held by the learned Tribunal to have had the jurisdiction to re-open the assessment and make assessment as in the present case. Re-opening of the assessment and making of the re-assessment were bad in law and the learned Tribunal committed no error either in fact or in law in allowing the assessee s appeal. Against revenue.

Issues Involved:
1. Whether the Tribunal was justified and correct in law in quashing the reassessment order passed by the Assessing Officer under Section 143(3)/147 of the Income Tax Act, 1961 on the ground that the reassessment proceeding initiated was barred by limitation.
2. Whether the Tribunal was justified and correct in law in quashing the reassessment order passed under Section 147 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Justification of Quashing the Reassessment Order on Grounds of Limitation:

The appeal challenges the Tribunal's decision to quash the reassessment order on the basis that it was barred by the proviso to Section 147 of the Income Tax Act, 1961. The proviso stipulates that no action shall be taken after four years from the end of the relevant assessment year unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

The appellant argued that the reassessment was valid as the assessee had not included the transport subsidy in its total income, thus receiving greater relief than entitled. The appellant contended that this omission attracted Sub-Clause (iii) of Clause (c) of Explanation 2 to Section 147, which allows reopening of assessments where excessive relief has been granted.

The respondent countered that the reassessment was barred by limitation as there was no omission or failure on their part to disclose material facts. The respondent emphasized that the transport subsidy was disclosed in the audited accounts and statements submitted with the original return, and mere omission to make a correct assessment by the Assessing Officer does not justify reopening the assessment beyond the prescribed period.

The court noted that the transport subsidy was indeed disclosed in the balance sheet and audited statements, amounting to full and true disclosure of material facts necessary for assessment. The court emphasized that the duty of the assessee is to disclose primary facts fully and truly, and it is the responsibility of the Assessing Officer to draw inferences and make a correct assessment.

2. Justification of Quashing the Reassessment Order under Section 147:

The court examined whether the reassessment order under Section 147 was justified. The court highlighted that Section 147 allows reopening of an assessment if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. However, the first proviso to Section 147 restricts this power if four years have elapsed since the end of the relevant assessment year, unless the escapement of income is due to the assessee's failure to disclose fully and truly all material facts.

The court referred to several Supreme Court judgments, including Associated Stone Industries Ltd. v. CIT and Calcutta Discount Company Ltd. v. ITO, which clarified that the duty of the assessee is to disclose primary facts fully and truly. The court reiterated that the mere fact that the Assessing Officer could have discovered the escapement with due diligence does not amount to non-disclosure by the assessee.

The court found that the transport subsidy was clearly disclosed in the balance sheet and audited statements submitted with the original return. Therefore, there was no failure on the part of the assessee to disclose material facts. The court concluded that the reassessment was invalid as it was initiated beyond the limitation period and without any omission or failure by the assessee to disclose material facts.

Conclusion:

The court upheld the Tribunal's decision to quash the reassessment order, concluding that the reassessment was barred by limitation and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The appeal was dismissed with no order as to costs.

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