2016 (8) TMI 1010 - SC - Income Tax

Reopening of assessment - non entitlement for deduction under Section 80(1B) - Held that - Information was supplied as there was some query about the value of the land. Obviously, while going to this document the Assessing Officer would examine the value of the land. However, the reason for issuing notice under Section 148 of the Income Tax Act was that the appellant had not correctly disclosed the actual assets of the plot and hence, it was not entitled for deduction under Section 80(1B) (10) of the Act. The Income Tax Authority itself has mentioned in the notice under Section 148 of the Act that such information was available only in the valuation report. Giving the information in this manner shall be of no help to the appellant as the Assessing Officer was not expected to go through the said information available in the valuation report for the purpose of ascertaining the actual construction of the plot. On the facts of this case, therefore, we find that the Revenue was right in reopening the assessment

Issues:
1. Validity of reopening assessment under Section 148 of the Income Tax Act.
2. Disclosure of actual assets of the plot for deduction under Section 80(1B) (10) of the Act.
3. Challenge to notice under Section 147 of the Act.
4. Interpretation of Explanation 2(c)(iv) of Section 147 regarding disclosure of plot size.
5. Application of tests for prima facie reason to believe income has escaped assessment.

1. Validity of Reopening Assessment under Section 148:
The appellant, a partnership firm engaged in real estate development, challenged the reopening of its assessment for the Assessment Year 2001-02 under Section 148 of the Income Tax Act. The appellant contended that full disclosure had been made in the return of income, arguing that the reassessment was based on a mere change of opinion. However, the Supreme Court upheld the reopening, emphasizing that the appellant had not correctly disclosed the actual assets of the plot, rendering it ineligible for deduction under Section 80(1B) (10) of the Act. The Court noted that the Assessing Officer was not expected to rely on information available in a valuation report to ascertain the actual construction of the plot, affirming the Revenue's decision to reopen the assessment.

2. Disclosure of Actual Assets for Deduction under Section 80(1B) (10):
The crux of the matter revolved around the appellant's failure to disclose the actual assets of the plot, leading to the denial of deduction under Section 80(1B) (10) of the Act. The appellant's argument that full disclosure had been made was refuted by the Court, highlighting that the information provided in the return was insufficient as it did not accurately represent the actual assets of the plot. The Court emphasized that the Assessing Officer's decision to reopen the assessment was justified based on the lack of correct disclosure by the appellant.

3. Challenge to Notice under Section 147:
The appellant challenged the notice dated 15.03.2007 issued under Section 147 of the Act, contending that all facts had been fully and truly disclosed, and the Revenue was aware of the plot's details. Despite the appellant's objections, the Court upheld the validity of the notice, emphasizing that the appellant had not correctly disclosed the actual assets of the plot, which was crucial for determining eligibility for deductions under the Act.

4. Interpretation of Explanation 2(c)(iv) of Section 147:
The Court delved into the interpretation of Explanation 2(c)(iv) of Section 147, which pertains to the disclosure of the exact size of the plot during new construction. The Court opined that due to the lack of true disclosure regarding the plot's size at the commencement of construction, there were valid reasons to believe that income had escaped assessment. The Court emphasized the importance of accurate disclosure in determining eligibility for tax benefits under the Act.

5. Application of Tests for Prima Facie Reason to Believe Income Escaped Assessment:
In assessing the validity of the reopening of the assessment, the Court applied tests laid down by previous judgments. The Court concluded that there were prima facie reasons to believe that income had escaped assessment due to the inadequate disclosure of the plot's actual assets. The Court differentiated this case from others where there was no failure to disclose relevant information or where the issue was merely a change of opinion, underscoring the significance of accurate and complete disclosure for tax assessments.

In conclusion, the Supreme Court dismissed the appeal, affirming the Revenue's decision to reopen the assessment based on the appellant's failure to correctly disclose the actual assets of the plot, thereby upholding the validity of the notice issued under Section 147 of the Income Tax Act.

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