2012 (3) TMI 192 - HC - Income Tax

Income escaping assessment - notice u/s 148 issued after expiry of four years - assessee submitted that the assessee he had fully and truly disclosed the facts at the time of original assessment relating to claim of investment allowance and on that basis, assessment order under section 143(1) of the Act was passed - Held that - The assessee does not discharge his duty by merely producing the books of account or other evidence - it cannot be held that there was true and full disclosure made by the assessee - perusal of the assessment order, no where suggests that the Assessing Officer had dealt with the issues on which reassessment is sought to be made while determining the taxable income of the assessee - it is to be held that the action taken by the Assessing Officer beyond 4 years shall be within limitation.

Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act.
2. Time limit for issuing notice under Section 148 of the Income Tax Act.
3. Full and true disclosure of material facts by the assessee.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147 of the Income Tax Act:
The petitioner, a practicing doctor, filed returns for the assessment year 1984-85 and claimed an investment allowance of Rs. 23,111/-. The original assessment was completed under Section 143(1) of the Income Tax Act on 25.7.1986. However, a raid conducted on 26.9.1986 led to scrutiny proceedings for the assessment year 1986-87. The Assistant Commissioner of Income Tax clubbed the petitioner's income with that of Bawa Nursing Home and assessed the return. The petitioner's appeal against this assessment was dismissed. Subsequently, a notice under Section 148 was issued on 15.11.1988 to reopen the assessment for 1984-85. The petitioner contended that he had fully and truly disclosed all material facts during the original assessment, and thus, reassessment under Section 147 was not justified. However, the court found no merit in this contention, citing Explanation 2 to Section 147(a), which clarifies that mere production of account books or other evidence does not amount to full and true disclosure.

2. Time Limit for Issuing Notice under Section 148 of the Income Tax Act:
The court referred to Section 149(1)(a) and (b) to determine the time limit for issuing a notice under Section 148. According to these provisions, a notice can be issued within eight years if the escaped income amounts to Rs. 50,000 or more. In this case, the court held that since the disclosure by the petitioner was not full and true, the reassessment notice issued within eight years was within the limitation period. The court emphasized that the mere production of account books does not fulfill the requirement of full and true disclosure under Section 147.

3. Full and True Disclosure of Material Facts by the Assessee:
The court analyzed whether the petitioner had made a full and true disclosure of material facts during the original assessment. It was observed that the Assessing Officer had not discussed the issue of investment allowance in the original assessment order. The court cited previous judgments to support the view that the duty to disclose all material facts is not discharged by merely producing account books. The court stated that the Assessing Officer is not expected to deduce the truth from voluminous records without specific reference to relevant entries by the assessee. Therefore, the court concluded that the petitioner had not made a full and true disclosure, justifying the reassessment proceedings.

Conclusion:
The court dismissed the writ petitions, holding that the reassessment notice was within the jurisdiction and limitation period. The petitioner was directed to present all relevant pleas before the Assessing Officer during the reassessment proceedings. The court emphasized the importance of full and true disclosure of material facts by the assessee and clarified that mere production of account books does not suffice. The judgments relied upon by the petitioner were deemed inapplicable as they did not consider Explanation 1 to Section 147 of the Act.

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