Reopening assessments in case of income escaping assessment. - Income Tax - 369/CBDT

INSTRUCTION NO. 369/CBDT Dated: January 12, 1972 Section(s) Referred: 147(a) ,147(b) ,148 Statute: Income - Tax Act, 1961 Not withstanding the instructions contained in Board's circular F.No 5/229/69-IT(Inv) dated the 27th October, 1969 (instruction No.120), the defects pointed out continued to appear in the proposals sent for reopening assessments under section 147. In this connection attention is invited to the observations of the Supreme Court in the case of Chugamal Rajpal Vs. S.P.Chaliha Others (79 ITR 603). The defects pointed out by the Supreme Court and the defects mentioned in the Board's Circular mentioned above, should be brought to the notice of all officers so that such defects are avoided in future. 2. The form for recording the reasons for reopening the assessments has been revised (printed below) with a view to ensure that none of the requirements of section 147 are lost sight of. The new form may be brought into use with immediate effect either by amending the existing form or having the new form typed. 3. In using the new form the Income-tax Officers should keep in mind the following points:- (i) This form should also be used by the Income-tax Officer for recording the reasons for reopening the assessments u/s 147 even in those cases where the Commissioner's and the Board's approval is not necessary. In a case which came to the notice of the Board, the Income-tax Officer had reopened the assessment mentioned in the handwriting of a Clerk on a copy of the notice calling off the return of income. Reopening of an assessment without recording the reasons by the I.T.O is bad in law and therefore in all cases such reasons must be recorded in the form. (ii) Sometimes it has been found that the exact income which is believed to have escaped assessment is not mentioned and sometimes if it is mentioned the manner in which it is worked out is not indicated in the proposals. As far as possible, the exact income escaping assessment should be mentioned against item 7 of the form and the manner in which it has been determined should be explained against item 11 of the form. (iii) The Board's approval for reopening the assessment is necessary not only in cases where the income escaping assessment exceeds Rs. 50,000 but in all cases beyond the 8 year limit. There may be cases where assessment has to be reopened u/s 147(b) read with section 150(1) after the 8th year limit. The Board's approval has to be obtained in such cases even though the income escaping assessment may not exceed Rs. 50,000. (iv) While it is not necessary to indicate in the notice whether the assessment is being reopened u/s 147(a) or 147(b), it is necessary that at the time of recording the reasons the Income-tax Officer applies his mind and indicates in the form whether the case falls u/s 147(a) or (b). It may be that on the facts of some cases both the sub-sections of section 147 may be applicable. If so, both the sections may be mentioned against item 7 of the form. (v) The issue of a notice u/s 148 in a case where no assessment has been made may not be justified if a voluntary return has already been filed by the assessee. The existing form did not provide for this information. Item 8 has, therefore, been introduced in the form to ensure that before recording his reasons the Income-tax Officer ascertains whether any voluntary return has already been filed by the assessee. (vi) In a number of proposals received by the Board in which the provisions of section 150(1) were invoked the relevant facts, in order to enable the Board to decide whether section 150(2) barred the opening of the assessment, were not mentioned. This aspect must be fully brought out against item 10. (vii) It would be preferable that the reasons recorded by the Income-tax Officer against item 11 of the form are mentioned in a separate sheet attached with the form so that full facts are clearly brought out. In this note the Income-tax Officer should fully bring out the reasons which lead the Income-tax Officer to the belief that income had escaped assessment and that such an escapement was due to the failure of the assessee to file a return or to disclose fully and truly all material facts necessary for his assessment. In case the belief about the escapement of income is in consequence of information in the possession of the Income-tax Officer, the information should be brought out in the note as also the fact that the information came in his possession after the completion of the original assessment. 4. These instructions may be brought to the notice of all officers working in the charge.