2014 (5) TMI 511 - HC - Income Tax

Validity of notice u/s 148 of the Act Reopening of assessment Bar of limitation Whether there was failure on the part of the assessee to disclose truly and fully all material facts for assessment Held that - The entire modality of disclosing undisclosed income was placed before AO during the proceedings of assessment itself - This included a sum as an amount admitted during the survey - If the AO had any doubt or dispute pertaining to valuation of the undisclosed stock and the disclosure of additional income by the assessee, he ought to have pursued the issue further during the assessment itself - By no stretch of imagination can it be stated that the issue that the AO now desires to raise for which the notice for reopening has been issued, flows from failure on the part of the assessee to disclose necessary facts. The assessee made a disclosure during survey of unaccounted stock - He forwarded it by filing a return maintaining such disclosure giving shape of declared income - If the AO felt that valuation of the stock was inaccurate - the disclosure was not full and he could as well have taxed the additional income, which in his opinion was not reflected by the assessee - it cannot be said that the income chargeable to tax had escaped the assessment due to failure on the part of the assessee to disclose truly and fully all material facts notice is set aside - Decided in favour of Assessee.

Summary

Issues:
Challenge to notice issued under section 148 of the Income-tax Act, 1961 for reopening assessment beyond the prescribed period.

Analysis:
The petitioner contested a notice issued by the Assessing Officer under section 148 of the Income-tax Act, 1961, seeking to reopen assessment for the assessment year 2006-07, beyond the four-year limit. The reasons for reopening included discrepancies in the valuation of undisclosed stock and the belief that income chargeable to tax had escaped assessment. The petitioner objected to the reopening, arguing full disclosure was made during the survey and subsequent assessment proceedings. The Assessing Officer rejected these objections, leading to the petition challenging the notice.

The High Court considered whether there was a failure to disclose material facts for assessment, as required for issuing a reopening notice beyond the four-year period. The reasons for reopening focused on discrepancies in the valuation of undisclosed stock and the alleged inadequate disclosure by the assessee. However, during the assessment proceedings, the assessee provided detailed explanations and reconciliations regarding the undisclosed income, including stock valuation, cash discrepancies, and additional disclosures not part of the survey proceedings.

The Court concluded that the assessee had made a full disclosure during the survey and subsequent assessment, providing detailed explanations and reconciliations. It was held that the Assessing Officer should have addressed any valuation concerns during the assessment itself, rather than issuing a reopening notice based on alleged failure to disclose material facts. Therefore, the petition was allowed, the notice was quashed, and no costs were awarded.