2016 (4) TMI 218 - HC - Income Tax

Reopening of assessment - AO completed the original assessment under Sections 8(2) read with 15 of the Interest Tax Act 1974 on 7.3.2000 for the assessment years 1996-97 and 1997-98 - Held that - The nature of the omission on the part of the assessee was indicated in the notice for reopening the assessment as an omission to indicate the nature of the discounting charges. The amount in respect of which the assessee claimed exemption related to discount on treasure bills. The Department claimed that under Section 2(7) of the Interest Tax Act discounting charges alone are excluded from the definition and that a discount on treasure bills does not stand excluded. The Department perceived that this distinction between a discount on treasure bills and discounting charges was omitted to be brought to the notice of the Assessing Officer entitling the Assessing Officer to reopen the assessment after four years on the ground of failure to furnish full and true information. Admittedly the assessee made a disclosure about the amount in respect of which they were making a claim under the heading bill discounting charges . Since it is a scrutiny assessment the Assessing Officer was obliged to consider the accounts documents and evidence before passing the orders of assessment. Normally it is presumed that an officer entrusted with a statutory function carries it out in accordance with law unless it is assailed to be not so. It is not the case of the Department that there was a failure on the part of the Assessing Officer to discharge his duties under Section 8(2) properly. In such circumstances it must be presumed that there was no omission on the part of the assessee or that there was an omission on the part of the Assessing Officer to scrutinize the accounts as per Section 8(2). In all other cases reopening is not possible. - Decided in favour of the assessee

Summary

Issues:
1. Reopening of assessment beyond four years.
2. Nature of omission by the assessee.
3. Scrutiny assessment under Section 8 of the Interest Tax Act, 1974.

Analysis:
1. The case involved appeals filed by the Revenue under Section 260A of the Income Tax Act, challenging the reopening of assessments for the years 1996-97 and 1997-98. The main issue was whether the Income Tax Appellate Tribunal was correct in annulling the assessments due to a lack of full and true disclosure by the assessee, even though the assessments were reopened beyond the four-year limit.

2. The Assessing Officer reopened the assessments after noticing that the assessee had claimed certain amounts as exempt under bill discounting charges for the respective years. The Department argued that the assessee failed to disclose fully and truly the nature of the discounting charges, specifically distinguishing between discount on treasure bills and discounting charges. The Tribunal, however, noted that the assessments were done under scrutiny and the Assessing Officer had the obligation to consider all relevant accounts, documents, and evidence before making the assessment.

3. The Tribunal highlighted that in a scrutiny assessment under Section 8 of the Interest Tax Act, the Assessing Officer must assess the chargeable interest based on the information provided by the assessee. Unless there is clear evidence of a failure on the part of the Assessing Officer to carry out the assessment properly, it is presumed that the assessment was conducted in accordance with the law. In this case, since there was no indication of any omission or failure in the assessment process, the Tribunal ruled in favor of the assessee, dismissing the tax case appeals.

Conclusion:
The High Court upheld the Tribunal's decision, emphasizing that in a scrutiny assessment, the Assessing Officer is expected to consider all relevant information provided by the assessee. As there was no evidence of any failure on the part of the Assessing Officer in this case, the Court ruled in favor of the assessee, dismissing the appeals filed by the Revenue.