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2022 (5) TMI 1350 - HC - Income TaxReopening of assessment u/s 147 - Period of limitation - receipts of gifts - addition u/s 56 on non-disclosure of the market value of the shares separately by the petitioner in its returns - number of WIPRO shares received as a gift were disclosed but neither the book value nor the market value of the shares was disclosed in the Balance Sheet - petitioner merely disclosed the receipt of gifts in the balance sheet as part of long term investments at NIL value and neither the book value nor the market value of the shares of Wipro Ltd. were disclosed by the petitioner - whether on 31.03.2021 the respondents were entitled to reopen the assessment proceedings of the petitioner for the assessment year 2012-13 after the expiry of four years as contemplated in Section 147? - HELD THAT - Revenue are entitled to invoke the proviso to Section 147 of the I.T. Act and reopen the proceedings even after the prescribed period of four years only if the petitioner - assessee had failed to fully and truly disclose all material facts for the purpose of assessment; failure on the part of the assessee to fully and truly disclose all facts which are material relevant and germane for the purpose of assessment is a sine qua non for the purpose of reopening the assessment. In the present case details contained in the income tax returns submitted by the petitioner clearly falsifies the allegation of the respondents that the book value of the shares had not been mentioned/stated by the petitioner; so also undisputedly in order to attract Section 56 (2) (vii) (c) of the I.T. Act the aggregate fair market value should exceed Rs. 50, 000/-; the aforesaid details mentioned in the income tax returns are sufficient to indicate that even if the market value of 49, 07, 14, 120 shares is taken at 1 paise per share it would exceed the aforesaid fair market value of Rs. 50, 000/- for the purpose of income tax; in other words in the light of all the details furnished by the petitioner in the returns including the total number of shares the methodology adopted to compute/quantify the number of shares the total number of shares for the previous assessment year the face value/book value of the shares being shown as Rs. 2/- each and the total market value of the quoted investments including the gifted shares coupled with the fact that the market value of the shares of Wipro Ltd. which is the public limited company whose share value is available readily in the public domain it cannot be said that the petitioner had failed to fully and truly disclose all material facts necessary for its assessment. Thus in the light of all the aforesaid material and relevant facts being fully disclosed by the petitioner in its returns which were more than sufficient to complete the assessment mere non-disclosure of the market value of the shares separately by the petitioner in its returns cannot lead to an inference that the petitioner has not fully and truly disclosed all material facts necessary for assessment; to put it differently so long as all other material and relevant facts had been furnished and disclosed and it can be clearly discerned from the returns and the documents that the market value of the shares was in excess of Rs. 50, 000/- simply because the market value of 49, 07, 14, 120 shares had not been separately stated/mentioned it cannot be said that the respondents were entitled to take shelter under the proviso to Section 147 of the IT. Act and seek to reopen the concluded proceedings of 2016 beyond the period of limitation on 31.03.2021. The material on record also discloses that at the time of assessment proceedings it was not the case of the respondents that the market value of the shares was a material fact that was not disclosed by the petitioner; on the other hand in its notice dated 09.06.2015 issued under Section 142(1) of the I.T. Act the only details sought for by the respondents was with regard to the complete list of donors with address PAN and the amount donated. In the said notice though there is a separate column which enables the respondents to seek details with regard to computation of income audit report along with financial statements/schedules additional information in this regard with regard to non-furnishing of the market value of the shares was not sought for by the respondents in the aforesaid notice dated 09.06.2015 (Annexure-G). This circumstance is also a pointer to the fact that the details furnished by the petitioner in its returns were sufficient and that the petitioner had fully and truly disclosed all material facts. In the instant case all relevant material facts viz. details of shares for the assessment years 2011-12 and 2012-13 have been stated including the breakup face value of the shares at Rs. 2/- per share the details of the shares for the previous year market value of all the quoted investments including the shares etc. have been furnished by the petitioner and accepted at the time of assessment without any demur; under these circumstances the respondents are not entitled to invoke the proviso to Section 147 of the I.T. Act in order to contend that the income from the shares has escaped assessment on account of failure on the part of the petitioner to fully and truly disclose all material facts. Viewed from this angle also the impugned notice and the reasons assigned by the respondents deserve to be quashed. It is the settled legal position that an assessee is under a duty or obligation to disclose only the basic and primary facts relating to his assessment and thereafter it is for the Assessing officer to make further enquires and draw inferences and if he does not do so for any reason then the Revenue cannot contend that there was any failure or omission on the part of the assessee. In the instant case after being in possession of all the relevant facts relating to the gifts of shares received by the petitioner the Assessing officer consciously chose not to apply Section 56(2)(vii)(c) of the I.T. Act. However after the expiry of the period of four years mentioned in the proviso to Section 147 the A.O has attempted to take a new view which is not permissible in law. - Decided in favour of assessee.
Issues Involved:
1. Validity of the impugned notice issued under Section 148 of the Income-tax Act, 1961. 2. Applicability of Section 56(2)(vii)(c) of the Income-tax Act, 1961. 3. Validity of the impugned Circulars dated 03.08.2012 and 31.12.2018. 4. Jurisdiction and limitation in reopening the assessment under Sections 147 and 148 of the Income-tax Act, 1961. Issue-wise Analysis: 1. Validity of the Impugned Notice Issued under Section 148 of the Income-tax Act, 1961: The petitioner argued that the notice dated 31.03.2021 issued under Section 148 of the Income-tax Act, 1961, was invalid as it was based on a patent error of law. The notice equated a private limited company with an individual, erroneously applying Section 56(2)(vii)(c) of the Act. The court found that the petitioner had disclosed all relevant and material facts in its income tax returns and replies, including the face value/book value of the shares and the total market value of all quoted investments. The court concluded that the impugned notice was illegal, arbitrary, and without jurisdiction, as the petitioner had fully and truly disclosed all material facts necessary for assessment. 2. Applicability of Section 56(2)(vii)(c) of the Income-tax Act, 1961: The petitioner contended that Section 56(2)(vii)(c) of the Income-tax Act, 1961, did not apply to the gift of shares of Wipro Ltd. received by it. The court noted that the petitioner had disclosed the face value and market value of the shares, which were readily available in the public domain. The court held that the non-disclosure of the market value of the shares separately did not amount to a failure to fully and truly disclose all material facts. Consequently, the court found that the application of Section 56(2)(vii)(c) was baseless and non-est. 3. Validity of the Impugned Circulars Dated 03.08.2012 and 31.12.2018: The petitioner challenged the validity of the Circulars dated 03.08.2012 and 31.12.2018, arguing that they were contrary to the provisions of Sections 2(31) and 56(2)(vii)(c) of the Income-tax Act. The court, however, did not find it necessary to adjudicate on this issue as it had already determined that the impugned notice and reasons for reopening the assessment were illegal and vitiated. 4. Jurisdiction and Limitation in Reopening the Assessment under Sections 147 and 148 of the Income-tax Act, 1961: The court examined whether the respondents were entitled to reopen the assessment proceedings beyond the prescribed period of four years as per Section 147 of the Income-tax Act. The court relied on various judgments to conclude that the respondents could only reopen the assessment if the petitioner had failed to fully and truly disclose all material facts necessary for assessment. The court found that the petitioner had disclosed all relevant details, including the face value/book value and market value of the shares. Therefore, the court held that the respondents did not have the jurisdiction or authority to reopen the assessment beyond the prescribed period of four years. Conclusion: The court quashed the impugned notice dated 31.03.2021 and the reasons for reopening the assessment, holding that the petitioner had fully and truly disclosed all material facts necessary for assessment. The court did not find it necessary to adjudicate on the validity of the impugned Circulars due to the illegality of the notice and reasons for reopening the assessment.
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